Health Insurance Claims Fraud Detection

Insurance companies and providers of health care benefits lose hundreds of millions of dollars yearly due to fraudulent claims for health benefits. Some of these are bogus claims that originate from insured persons, while others are payments for insured services that are not needed but are wrongly prescribed by providers who stand to make illegal profits.

The U.S.-based National Health Care Anti-Fraud Association estimates healthcare fraud costs the nation no less than $68 billion annually — about three percent of the nation’s $2.26 trillion in healthcare spending. Others say that number may be substantially higher.

The bottom line is fraud costs everyone through higher premiums or through tax dollars spent on public health benefits. Benefits fraud is a serious crime and is treated that way by law enforcement agencies around the world.

This whitepaper will outline common schemes and case studies to help your organization prevent or uncover fraud ahead of it being paid out.

The Importance of Health Insurance Claims Fraud Detection

Insurance companies and providers of health care benefits lose hundreds of millions of dollars yearly due to fraudulent claims for health benefits. Some of these are bogus claims that originate from insured persons, while others are payments for insured services that are not needed but are wrongly prescribed by providers who stand to make illegal profits.

The U.S.-based National Health Care Anti-Fraud Association estimates healthcare fraud costs the nation no less than $68 billion annually — about three percent of the nation’s $2.26 trillion in healthcare spending. Others say that number may be substantially higher.

The bottom line is fraud costs everyone through higher premiums or through tax dollars spent on public health benefits. Benefits fraud is a serious crime and is treated that way by law enforcement agencies around the world. This whitepaper will outline common schemes and case studies to help your organization prevent or uncover fraud ahead of it being paid out.

Heath Insurance Fraud Schemes

Billing for services not rendered

This kind of scheme involves the charging of services that are not rendered by the medical provider.

Detecting billing fraud schemes

• Identify the reported dates for the received medical services in the claim form and cross-check them with the medical file
• Make cross-check verifications with the medical facility on the specific dates filled on claim forms
• Check with the facility sign-in logs and appointment calendars
• Verify billing details with the listed doctor
• Check if the type of the customer’s condition matches with the doctor’s area of specialty

Unnecessary medical testing/overtreatment

At times, a patient is advised that they need additional medical testing to diagnose the problem. In fact, the testing is not required and the fee for the unnecessary work often is split with the physicians. In some cases, physicians own the medical testing service.

Sometimes insurance providers are billed for something more than the level of care actually required. This can include medical equipment as well as services.

Detecting unnecessary treatments

• Check if the medical testing procedures are in line with the patient’s condition
• Look for medical testing procedures that are redundant, repeated, or are related to totally different medical conditions that fall outside of the patient’s condition

Case Study: Chicago-area physical therapy center and nursing facilities to pay $9.7M

The U.S. Attorney’s Office in Chicago announced that a Chicago-area physical therapy center and four nursing facilities have agreed to pay $9.7 million to resolve civil allegations that they violated the False Claims Act by providing unnecessary services to increase Medicare payments.

The allegations also contend that the providers rendered skilled therapy to patients who did not need it or could not benefit from it, as part of an effort to bill the highest possible amount to Medicare.

The settlements and consent judgments resolve a civil lawsuit under the whistleblower provisions of the False Claims Act. The Act permits private citizens to bring lawsuits on behalf of the United States for false claims, and to share in any recovery. The United States intervened in the lawsuit prior to the settlements and consent judgments.

Frances Parise, the owner of the nursing homes, also agreed to be excluded from all participation as a provider in Medicare, Medicaid and all federal health care programs for a period of five years.

Source: FBI

Fictitious providers – Bogus doctors

In this scheme, an individual who is not a doctor opens a medical practice. The individual obtains or creates a doctor’s ID number to appear legitimate.

Detecting bogus doctors

• Check official databases of medical providers
• Verify the medical providers against a checklist of official qualifications that must be in place
• Verify the address of the medical provider or doctor
• Verify that the physician has not been suspended by its regulatory body

Double billing

Double billing occurs when the insured and/or the provider seek to be paid twice for the same service. The fraud might be perpetrated by the insured with the complicity of the provider, or the provider alone might do it.

Preventing multiple billings

• Look for multiple submissions for the same type of expense and/or treatment
• Check for submissions from blacklisted providers
• Check for multiple submissions for the same date
• Investigate sudden increases in reimbursements

Coding fragmentation/fictitious coding/unbundling

In this case, bills for a service are submitted a bit at a time or staggered over time to increase charges. Sometimes these services cost less when bundled together, but by separating the claim into components, a higher charge is billed to the insurance provider resulting in a higher payout to those committing the fraud.

In coding fragmentation, there is also a possibility for misrepresenting a non-covered medical service as a covered one. In order to justify a medical procedure against a diagnostic code, a fictitious diagnostic code might be entered in order to appear legitimate. The false billing takes place if the physician or the other primary provider knowingly enters an incorrect diagnostic code.

Red flags for detecting the scenario

• Use analytics to determine whether each code submitted is a subcomponent of one or more comprehensive codes.

Kickbacks

Kickbacks are payments or non-monetary gifts or rewards used to entice medical professionals into using specific medical services. This could be a cash kickback for using a specific clinic or service when not required.

Detecting and preventing the scenario

• Review vendor transactions to detect unusual concentrations of activity with a few providers
• Review year-to-year comparisons in transactions for significant increases with providers or where costs of materials or services are out of line
• Flag for potential cases of overbilling
• Review vendor addresses to employee addresses to look for matches

Case study: Doctors and marketers charged with taking kickbacks

Three physicians and five marketers in Tulsa, Oklahoma have been charged with violations of the federal anti-kickback statute and other criminal offenses. The men allegedly got kickbacks and caused federal health care insurance programs to pay them directly for fraudulent and expensive compounding drug prescriptions written by recruited doctors.

Dr. Krishna Balarma Parchuri, 44, of Tulsa, is charged with Christopher R. Parks, 57, of Tulsa, Dr. Gary Robert Lee, 58, of Tulsa, and Dr. Jerry May Keepers, 65, of Kingwood, Texas, with conspiracy to commit health care fraud. Keepers and Parchuri are also charged with soliciting and receiving illegal bribes and kickback payments.

The criminal indictment alleges Parks and Lee engaged in a conspiracy to unlawfully pay kickbacks and bribes Kickbacks are payments or non-monetary gifts or rewards used to entice medical professionals into using specific medical services. This could be a cash kickback for using a specific clinic or service when not required.

The defendants then allegedly submitted $4.3 million in claims for payment to federal health care programs and divided the profits.

Conspiracy to violate the anti-kickback statute carries a possible maximum sentence of five years in prison and a $250,000 fine, while violating the anti-kickback statute carries up to 10 years in prison and a $100,000 possible fine. A conviction of health care fraud without injury or death also carries a possible maximum of 10 years in prison.

Source: FBI

Claim submission fraud

Multiple claims

An insured may have multiple coverage policies, and has the right to submit claims to more than one insurer and under more than one policy. Insurance coverage provisions require that one carrier be designated as the primary insurer and the other companies will be secondary or tertiary insurers.

The insured commits a fraud when he makes a claim for a covered loss without revealing that he has already been paid for that loss. Such fraud may involve both fraudulent concealment of the prior claim and payments and misrepresentations that the loss has been uncompensated.

Alteration

A dishonest claimant could inflate a prescription or medical bill by placing an additional number in front of the amount charged. The claimant could also alter the date of service so it becomes a recoverable expense. Another form of alteration is when the individual submitting claim may change the name on the bill from an uninsured family member to one included in the insurance plan. Other forms of alteration include using:

• Ineligible dependents
• Name and address of the person receiving the treatment
• The patient’s true relationship is to the insured
• A complete description to the person receiving the treatment
• A complete physical description of the impersonator
• Complete hospital records, including the emergency room report, the admitting history, and the physical description of the patient

Third-party fraud

This category involves the use of an insured’s identification card by another person. The actual ID holder is made aware that his insurance plan has been used by another person. The ID holder then makes the claim to the insurance company and falsely claims that he actually received the services personally.

Detecting and preventing the above scenarios

Look for the following when trying to detect multiple claims, alterations and third-party fraud:

• Misspelled medical terminology
• Unusual charges for a service
• Similar handwriting by the claimant and the provider of the service
• Typed rather than printed billings
• Bills with irregular columns
• Unassigned bills that normally are assigned
• Drug receipts from the same pharmacy but on different paper
• Erasures or alterations
• Lack of any provider’s signature on a claim form
• Absence of the provider’s medical degree
• An illegible provider’s signature
• Pressure by claimant to pay a claim quickly
• Individuals who hand-deliver their claim and insist on picking up their claim cheque
• Continuous telephone inquiries regarding the status of a pending claim
• Poor quality photocopies of documents that should be original documents
• Frequent change of medical providers
• Independent medical exams that reveal conflicting medical information

Other red flags to consider

Claimants red flags

• Are soon to retire, facing disciplinary action or layoffs
• Take unexplained or excessive time off prior to claimed issue
• Have inappropriate or a lack of medical treatment for injuries
• Are experiencing financial difficulties
• Change physicians to achieve a different diagnosis
• Frequently change medical providers
• Have demands for quick or early settlements
• Have independent medical exams that reveal conflicting medical information
• Have unprofessional diagnostic terminology

Documentation red flags

• The insured refuses or is unable to answer routine health questions
• The insured provides supporting evidence and documentation that cannot be corroborated
• Information on a life insurance application is vague or ambiguous as to the detail of health history
• The physician’s report is vague on details of past medical history and does not coincide with the
  information shown in the application
• A series of prescription numbers from the same drug store do not line up chronologically with the
  dates of the prescriptions
• Documents are obviously altered; whiteout or erasure is evident
• Documents are improperly filled out, entries are in the wrong place, and information provided does not
  make sense
• Claims are filed where the carriers indicated no record of coverage
• Poor quality photocopies of documents that should be original documents
• There are gaps in the patient’s medical file for missed medical visits

Fraud is not a victimless crime. We all pay for fraud through higher premiums or lost services because governments or insurance providers have to spend part of their budgets toward these fraudulent claims. If you suspect fraud, report it.

In the United States, the FBI is tasked as the primary agency for investigating federal or private health insurance fraud. Patient-driven fraud can mean others needing treatment are unable to receive it, while conspirator fraud may mean some patients do not get the full and necessary treatment they deserve.

Alessa can help screen transactions and ongoing business between caregivers and insurance company staff. To learn more about Alessa can help with health insurance claims fraud detection and the prevention of other forms of financial crimes, contact us today.