Leveraging Data and Analytics to Detect Fraud and Abuse in Healthcare


According to the Institute of Medicine (IOM), fraud and abuse in healthcare contribute to as much as $75 billion in costs each year. In fact the Centers for Medicare and Medicaid Services (CMS) estimates that fraud and abuse add up to 10 percent to the total expense of a Medicare claim. That amount would fund NASA’s budget for 15 years.

Moderator Jennifer Covich Bordenick, chief executive officer, eHealth Initiative discussed ongoing efforts to combat fraud and abuse with an esteemed panel including Michael Nelson, vice president of strategy and business development, Equifax identity and Fraud Solutions; John Benson, chief operating officer and co-founder, Verisys; Gerald Cliff, research director, National White Collar Crime Center; Melanie Endicott, senior director of HIM practice excellence, AHIMA; and Mark Isbitt, director of market planning, LexisNexis. The panel met and discussed during today’s session of the CDI Summit held in Washington, DC.

Financial losses caused by healthcare fraud, abuse and waste are only a part of the story. These actions have a human face. Individual victims of healthcare fraud are easy to find and the statistics are staggering. These people are exploited and subjected to unnecessary and/or unsafe medical practices. Sometimes health records are compromised and sometimes their legitimate insurance information is used to submit falsified claims. The panel warned participants to not be fooled into thinking that healthcare fraud is a victimless crime. There is no doubt that it can have devastating effects.

Michael Nelson reported that fraud and abuse are rampant across all sectors of healthcare today. Fraud can be broadly defined as intentionally making false claims or representations to

receive unauthorized benefits or reimbursement, such as billing for services that were not provided. Abuse describes inappropriate actions that are not consistent with sound medical, fiscal, or business practices, such as obtaining multiple prescriptions for the same medication from different providers.

In addition to these topics, the panel noted that “waste” must also be defined. Waste is just what it sounds like. It includes items such as a general waste of services, duplicative tests, bad billing practices, payer adjudication systems that are ill equipped to handle a multitude of different contracts. In some respects, payers are paying more attention to the topic of waste in order to increase the medical loss ratio. Panelist Mark Isbitt estimated that “85% of the cost of healthcare fraud can be attributed to waste.”

Cliff stated that “identity theft is the fastest growing white collar crime in the US.” In fact, he estimates approximately 31 percent of medical identity theft comes from family members who take and use insurance cards, with the full knowledge of the family member who actually owns the card. Fraud, abuse and waste not only lead to higher costs of care for consumers, taxpayers, and employers, but also have the potential to adversely impact patient quality and safety. Due to the complexity and prevalence of these issues, it has become critical for healthcare payers, providers, and other organizations to implement safeguards aimed at early detection and risk mitigation.

Nelson explained to the audience how easy it is to gain access to a national provider identifier (NPI) number. The NPI number is the official identifier for providers as well as other private health services. To apply it is as simple as using the internet, and having a few pieces of identifiable information. Unfortunately, checking to determine if a provider has an active NPI number does not guarantee the person is actually a practicing physician. In fact, the majority of the information on the NPI site is public knowledge and only indicates that the person entered information.

Staying with the technology theme Isbitt explained that most people who are committing healthcare fraud have already committed credit card fraud. Using data analytics, the government can prevent fraud and abuse. Traditional analytics include data mining and predictive modeling. Effectively managing healthcare data and understanding the format of organizational data is critical in identification. Isbitt went on to explain that fraud, abuse and waste “is not payer or code set specific and for those under investigation, the ability to have clean articulate data is vitally important.”

Endicott expanded on the impact of accurate data as she explained the potential impact that ICD-10-CM/PCS may have on fraud and abuse activities. “ICD-10-CM/PCS is a documentation issue, not a coding issue, with increased specificity that can aid in accurate data collection” she stated. Endicott encouraged attendees to educate practice management staff on ICD-10 and to be a front line defense against fraud and abuse. Benson stressed to the crowd that ICD-10 “will not impede fraud and abuse monitoring, the Office of Inspector General (OIG) will continue to enforce fraud and abuse regardless of the code set.”

Fraud, abuse, and waste represent a great source of misuse in healthcare today and has an impact on providers, payers, patients, and communities. It costs the US tens of billions of dollars a year, and continues to be a rising threat. The Federal Bureau of Investigation (FBI) estimates the cost to exceed $3 trillion in 2014. Recent cases also show that the individuals committing these crimes continue and appear more than willing to risk patient harm to further their schemes.

The National Health Care Anti-Fraud Association says that the most common types of fraud include:

  • Billing for services that were never rendered—either by using genuine patient information, sometimes obtained through identity theft, to fabricate entire claims or by padding claims with charges for procedures or services that did not take place.
  • Billing for more expensive services or procedures than were actually provided or performed, commonly known as “upcoding.”
  • Performing medically unnecessary services solely for the purpose of generating insurance payments—seen very often in nerve-conduction and other diagnostic-testing schemes.
  • Misrepresentating non-covered treatments as medically necessary covered treatments for purposes of obtaining insurance payments—widely seen in cosmetic surgery schemes, in which non-covered cosmetic procedures such as “nose jobs” are billed to patients’ insurers as deviated septum repairs.
  • Falsifying a patient’s diagnosis to justify tests, surgeries, or other procedures that aren’t medically necessary.
  • Unbundling—billing each step of a procedure as if it were a separate procedure.
  • Billing a patient more than the co-pay amount for services that were prepaid or paid in full by the benefit plan under the terms of a managed care contract.
  • Accepting kickbacks for patient referrals.
  • Waiving patient co-pays or deductibles for medical or dental care and over-billing insurance carriers or benefit plans.

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