Strategies to Combat Medical Provider Fraud in Workers' Compensation

Our workers' comp guru Peter Rousmaniere explains how to isolate fraudulent medical providers and tackle pain management fraud.

By PETER ROUSMANIERE, an expert on the workers' compensation industry

Jill Breard, operations manager for risk management services at the Louisiana Workers' Compensation Corporation, estimates that seriously problematic medical providers make up well less than 1 percent of all providers. Her calculation is credible because LWCC has spent well over a decade scouring the state's medical community for questionable (as well as the best) medical practitioners.

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Those very few defrauding medical providers can rack up hundreds of thousands of dollars a year by bilking every insurer they service. They can run every patient through identical procedures without any justification and bill for services not rendered. To an idea of the size of these operations, State Farm won a jury award of $15.4 million in March of this year on a RICO suit against a few clinicians.

THE HOW-TO

After a doctor comes under suspicion, Breard has the bill-review system flag the provider's tax identification number. She also uses a medical payments audit firm to electronically audit past medical payments for holes in the bill-review systems.

Software is the only effective way to document collusive interrelationships among providers. Jean MacQuarrie, vice president, healthcare, at Thomson Reuters, said that her company's detection software picks up networks of providers who "ping-pong" patients among themselves.

Computer "analytics is still in its early stages but developing quickly", said Tom McCarthy of Mitchell Medical. "We are also using large repositories of data to look for trends that might indicate a new scam. We found a diagnostic radiology scam from analyzing our data well before anyone in the industry recognized it."

PAIN MANAGEMENT: THE FRAUD FRONTIER

More money is misspent due to abuse and deception in pain care than is generally recognized.

Upward of 30 percent of pain patients are deceptively abusing their drugs, according to a New Hampshire-based pain clinic that did not wish to be identified. A claimant on a narcotic drug might divert her or his pills to others.

A doctor may drug test patients and have them sign an "opioid agreement," detailing the consequences if they are caught abusing their patient status. But few insurers are aware of which doctors do this. Most accept medical reports without even asking for proof that the patient is taking prescribed drugs.

The really big dollars in pain management fraud arise from companies that sell or distribute drugs.

The most flagrant criminal case involved a misinformation campaign by Purdue Pharma about the safety of its blockbuster drug, Oxycontin. The company pled guilty in federal court to fraud in 2007 and more recently settled a class-action suit to which workers compensation insurers and self-insured employers were beneficiaries. Access to the small pot of settlement money is now closed.

The drug distributor McKesson, through whom many workers' compensation insurers purchase drugs, secretly manipulated drug prices so that insurers paid more than their contracts indicated. McKesson settled for $350 million in late 2008.

Corporate counsel, not the special investigations unit, should be tracking and joining in suits against these firms.

Exposure to claims fraud has broadened. Insurers need not only gumshoe investigators, but computers and increasingly large helpings of medical intelligence to attack fraud today.

October 5, 2009

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