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By STEVE TUCKEY, who has written on insurance issues for a decade for several national media outlets

Hannah Montana, aka Miley Cyrus, certainly has her legions of devoted fans. But most of them are of the prepubescent female variety.

It all started when a Hartford radio station sponsored a men-in-drag 40-yard dash, with concert tickets the grand prize.

How could Garrett Dalton just say no?

Unfortunately, one viewer of the event's TV coverage spotted Dalton as someone on comp leave. And thus, whatever penalties the state and his employer may impose, they surely pale in comparison to what his co-workers are saying in the coffee break room.

Workers' compensation insurance claimant fraud is of course a serious issue, despite its occasional lurches into the realm of the absurd.

Dennis Jay, executive director of the Coalition Against Insurance Fraud, who reported the above incident in his blog, said that during tough economic times investigators are on high alert for claimant fraud from workers who fear for their jobs.

"Traditionally, workers do make bogus injury claims when they know that layoffs are on the horizon," Jay said. "Whether the statistics will bear that out remains to be seen."

Don Marshall, vice president for Woodland Hills, Calif.-based Zenith Insurance Co., took a different view from Jay in how the downturn might impact worker fraud claimant frequency.

"What we anticipated was the possibility of a reduction in injured worker fraud," he said.

The most obvious reason would be payroll reductions.

"And also, what we felt was that people in the past who might have gamed the system for additional time off, some of those people would go out of their way to get back to work because they fear that 'if they don't need me they might just dump my job.' "

Marshall said the number of suspected frauds has remained fairly stable, whatever the shape of the economy.

"We are still getting about the same number of referrals in proportion to the number of claims," he said.

And so the question remains of just how many workers' comp claims each year are fraudulent. Individual applicants make up only a third of the workers' comp fraud puzzle, with employer and medical provider fraud generally thought each to incur the greatest cost to the overall system.

But claimants remain the most visible target and stories such as the high-heeled corrections officer put a human if sometimes oddball face on the issue. A popular NBC sitcom even pegged the story line of one episode this fall on a phony workers' compensation claim, providing another pop culture focus on the issue.

Workers' compensation expert and blogger Peter Rousmaniere, a frequent contributor to Risk & Insurance®, said the sages both over and underestimate claimant fraud.

"Seasoned fraud investigators working for some of the best-managed claims operations estimate that only about 1 percent of lost-time compensable claimants commit prosecutable fraud," he said.

While that comes to about 7,000 claims a year, Rousmaniere also said that best practices can proficiently mitigate most of these claims.

Jon Coppelman, a workers' comp consultant with Lynch Ryan & Associates in Wellesley, Mass., said high-profile cases have led many industry executives and employers to believe, often erroneously, that up to 25 percent of comp claims contain some element of fraud.

"We disagree," said Coppelman, referring to the 25 percent figure, which he believes is too high. "Some people are larcenous but most people aren't. Employers who build their entire workers' comp program on a foundation of fear of fraud are most likely to create more problems than they solve."

While one may quibble as to the numbers, no one doubts that the challenge of detecting and punishing claimant fraud remains a serious one.

Rousmaniere said most claims departments rely too heavily on adjusters to identify and do the initial spade work. "For instance, a claims adjuster may decide alone to order surveillance on a claimant without consulting others such as case managers and the special investigations unit (SIU) staff," he said. "When adjusters work in isolation, the risk of misidentifying claims, or simply not responding to red flags goes up."

Zenith's Marshall said that every indemnity claim, for time off in addition to medical treatment, faces scrutiny from the company's special investigations unit.

Since only about one quarter of applicant fraud occurs at the outset of the claim, Marshall said reviews of the claim remain critical to the ultimate detection of any fraud. "Most fraud occurs downstream, when the claimant begins to work in other employment and denies doing so, or feigns continued physical or psychological impairment to doctors and the insurer," he said.

Just like in premium fraud, Marshall said the later reviews by claims examiners working in tight coordination with SIU experts is the key to success. Zenith uses custom-made "browsers"--computer queries to look for trends or patterns--to raise red flags during the life of any claim.

For example, a claimant being off work for many months on a soft tissue injury does not in and of itself constitute fraud.

"But it might be a claim that SIU wants to look at a little closer," he said. "So we do identify files with certain flags present in place to take a closer look at the case."

Marshall has found little value in predictive analytics that use computer models to help ferret out fraud in the workers' comp arena, believing models are better suited for healthcare or automotive insurance lines. "We have never found a system that works just as well as good solid claims examining," he said.

Private investigator Neal Lyons debunks the Hollywood myth of an investigator tricking the collar-wearing workers' comp claimant into turning his head by dropping a briefcase on the courtroom floor. "It just doesn't happen that way," he said.

He said that 99 percent of all workers' comp investigations require video surveillance of the claimant--what can be a two to three day operation.

Video surveillance can catch supposedly injured claimants in leisure or work situations that are not appropriate to their disability status.

Work situations consist of claimants going to another job, or more likely, working on a freelance basis, in the case of painters and construction workers who usually moonlight on a smaller scale.

"Once the investigator can positively identify the claimant, then it is a matter of continuing the surveillance and documenting their behavior and actions," Lyons said.

But that is only the beginning.

For every claim sent to prosecutors, at least 10 fraud claims will be mitigated within the workers' compensation system. The main barrier remains not the law or the quality of evidence but rather the commitment of prosecutors. "Prosecutors across the country win perhaps 250, and probably much fewer criminal convictions for workers' compensation claimant fraud each year," said Rousmaniere.

Doug Markham, executive vice president, Avizent Managed Care, said improving technology has helped in the battle against claimant fraud but it is not enough. "What we need is employers stepping up the plate and make fighting fraud a priority."

He recalled the case of a longshoreman in California receiving thousands of dollars in benefits for a work-related injury initially treated as a fracture.

"By checking claims data and examining the file, we knew something in the case did not add up," he said.

Data such as injury dates, types and numbers of treatments eventually led to information about the claimant building a boat, which he subsequently sailed to Hawaii.

Once nabbed, the suspect voluntarily returned to California for prosecution.

Tim Barry, the special investigations unit and fraud director for Specialty Risk Services, said new technology has reduced SIU field analyst time by 75 percent in seven out of 10 fraud referrals.

And of course, the Internet and YouTube have helped.

Barry, without ever leaving the office or donning a trench coat, has found the bowling scores of a worker on disability along with data on another claimant finishing a marathon.

Drug abuse and diversion among claimants remains a critical challenge for comp carriers looking to not only rein in medical costs but also impede an increasingly dangerous societal ill.

Tron Emptage, executive vice president for business development for Columbus, Ohio-based Progressive Medical Inc., said that doctor-shopping is still one of the key clues to finding those patients abusing drugs either for their own treatment and recreational use, or sharing the spoils with others for profit.

"What we see often is that the patient who does not get adequate pain relief may start seeking other physicians to get adequate pain control, or to get additional pain medication because of the side effects and tolerance building and addictive type properties of pain medication," he said.

Fraud comes into play when the claimant fails to inform the new doctors of his past history.

Pharmacy benefits managers (PBM), such as Progressive Medical, and the carriers themselves face the challenge that some states allow comp claimants to have multiple physicians.

"And so it is in those situations, we are monitoring that if they are asking for medications from multiple physicians and trying to get them some sort of reimbursement process, we are able to alert the adjusters to the situation and begin the relevant queries," he said.

Those states that only allow one treating physician, or have a strict review process for multiple physicians, aid investigators in their effort to ferret out comp drug abuse and fraud, Emptage said.

Progressive Medical's investigators provide a series of alerts to case managers and other claims officials that could indicate any number of scenarios, from a patient truly seeking pain relief from an overly cautious doctor to the claimant who is looking to make a quick buck on the street. As for those using a bogus script, Emptage said that a PBM would not be able to catch that right away since they have no contact with the patient.

Peer review, independent medical examinations (IME) and other forums are the best places to catch that fraud.

John Burke, commander of the Warren County, Ohio drug task force and president of the National Association of Drug Diversion Investigators, said states can play a key role in fighting drug diversion through the creation of effective prescription monitoring programs (PMP).

"I have always said that a good PMP will pay for itself in the reduction of state-funded insurance costs like Medicaid and workers' comp, but more importantly it just might save some lives along the way."

That may or may not be, but both the public and the private sectors are going to have to work double time to control a new wrinkle in pharmaceutical management. What are known as compounding companies that are combining multiple drugs in one product in many states are making it that much more difficult for payers to determine exactly what they are paying for and how much each element should cost.

Daryl Corr, president of Tampa-based Healthesystems, a medical costs management company, said many companies might not have the time or the expertise to decipher the composition or the allowable costs associated with the ingredients of these compound medications in addition to determining whether the compound contains brand names, or generics, or some mixture of both.

And on the side of safety, such compounds make it that much more difficult to determine whether a workers' compensation claimant, for example, might have a prescription for a compound that contains an opioid from one doctor, and have a prescription for a noncompound opioid from yet another.

In many cases the payers' or PBMs' pharmacy management systems are unable to record the individual ingredients (NDC information) that make up the compound."If you do have a compound that includes Oxycontin over here and then you have another prescription that is solely Oxycontin in another place, in a lot of cases a payer may not even realize that, okay, I have two prescriptions for Oxycontin going on at the same time. Because they'll see the one but they won't necessarily know that it's also in the other because the normal drug utilization edits aren't identifying it," Corr said.

Healthesystems has the technology to break down a compound pharmacy billing to help the payer maximize its pharmacy savings in accordance with individual state laws.

November 1, 2009

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