Fraud.
Waste.
Abuse.
A terrible trio
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The one thing to know about fraud is that it is an ever-present factor in health insurance’s day-to-day business. It can be defined in everyday language as “Wrongful or criminal deception undertaken with the intent to obtain financial or personal gain.” Legal definitions of fraud, however, tend to be stricter and narrowly focused on specific aspects, and can vary depending on the country. For example, the U.K.’s 2006 Fraud Act defines civil fraud as “a false representation that has been made knowingly, without belief in its truth, or recklessly.” It further states that “fraud may be committed by false representation, failure to disclose information, and abuse of position,” with all actions showing intent to create a gain for themselves or cause loss to another.
Types of health insurance fraud, waste, and abuse
Fraud, waste, and abuse can take many forms, such as:
Failure to disclose information material to a claim, whether due to inadvertent oversight or deliberate acts of misrepresentation, is highly prevalent in healthcare. The most commonly experienced is failure to fully disclose medical history, as medical conditions predating policy inception are often subject to pre-existing condition exclusions.
Acts of misrepresentation involve deliberately providing false statements in order to misguide approval of claims. Examples:
A nonspecific gynecological symptom is claimed for to justify further investigation into or treatment for infertility, which is typically excluded from health insurance. Red flags can include claimants being of childbearing age or that the doctor submitting claims information is an infertility specialist.
Billing for a service is from a location charging more than the one in which the service was actually provided. For instance, billing for the fees of operation theater use when a procedure was actually performed in the office setting.
Claim indicating a treatment was provided by a higher-grade staff member (e.g., a doctor) than by the one who actually did so (e.g., a nurse practitioner or physician’s assistant).
Claims for surgeries that involve cosmetic procedures, especially when under the pretence of a vaguely described medical condition, such as: o Breast reduction surgery as therapy to relieve back pain o Rhinoplasty to repair a deviated septum o Multiple mole removals in an investigation of possible malignancies
Providers billing for services, such as examinations and tests, that were not performed. Such bills can come either from service providers or claimants. If providers submit invoices directly to the insurer and the insurer settles with the provider, this risk can be reduced. Claimants should be provided an “explanation of benefits” or “claims statement” detailing the treatment(s) that were billed for so that any incorrect items can be corrected.
When settlements are with insureds, claimants might submit duplicated invoices to bill for treatments they did not receive (e.g., false multiple follow-up consultations). Claimants should be required to provide original invoices, and claims assessors should be aware of how various providers format invoices in order to compare them effectively. Assessors should also check for unusual or excessive treatment patterns. AI-enhanced technologies such as optical character recognition (OCR) might help detect documents that have been manufactured or altered.
Items such as a hospital keeping a patient longer than medically necessary, admission to a hospital without sufficient medical reason for a procedure doable on a day-patient or outpatient basis, and medical care provided without an acceptable reason in more advanced settings than may qualify as medically necessary, such as intensive care and high dependency units (e.g., Special Care Baby Units [SCBUs], Neonatal Intensive Care Units [NICUs], coronary care units). Insurers should have defined criteria for approving such admissions and care, and the ability to obtain medical records on the case for the company’s Medical team.
Overutilization can also include early admission and late discharge related to hospital stays without medical reason, medically unnecessary tests and diagnostic procedures such as full blood screening or pathology tests, use of advanced imaging technologies (such as an MRI) when an x-ray might provide the same sort of information, and unnecessarily extended courses of physiotherapy, cognitive behavioral therapy, or occupational therapy. Items such as too-frequent repeat consultations, overutilization of operating theater packs, and overprescribing of medications are also important flags for claims assessor awareness.
Insurers can assess utilization for overuse by using a strong definition of medical necessity for their policy documents and by ensuring all claimed treatments meet their definition. (See Global Health Brief, Understanding medically necessary (medical necessity.)).
Excessive charges for supplies and procedures are particularly prevalent for drugs and other medical consumables such as implanted prostheses. Providers are expected to mark up consumables, but insurers should be aware of actual costs and challenge excessive charges. Insurers should also have strong policy language around reimbursement of “usual and customary” charges.
Identifying fraud, waste, and abuse
Artificial intelligence is also emerging as a tool. Machine learning models that examine average length of hospital stay, for example, can be trained to assess claims using the diagnosis, procedure(s) undertaken, and patient age, gender, and comorbidities, as all of these factors can affect length of stay. AI can also detect certain subtle patterns in claims data such as the number of cross-referrals for claims with a certain diagnosis code. However, it is not infallible. It might interpret common actions as correct, even though they might not fit with an insurer’s medically necessary guidance.
All technologies, including models, have a role to play in the detection of fraud, waste, and abuse, and will need to be updated (and in the case of models, retrained) on an ongoing basis as trends evolve and more data comes available.
Processes and strategies
Benefits access rules should be well-structured. For example, a physiotherapy benefit claim from a provider where the insured initiated the treatment without referral by their physician would need a highly structured approval pathway to control negotiated costs and limit overutilization. Internal strategies can include developing multifunction specialist teams to undertake certain tasks, such as investigating unusual referring patterns.
Insurer contracts with providers define levels of service to be provided and costs involved, and audits of all billed services related to inpatient care, such as prescriptions, administration, and billing, ensure that these are ordered by appropriate people, correctly administered, and billed in line with contract arrangements. Insurers should monitor all providers carefully for elements such as utilization trends, which can assist with contracting negotiations. They should also have technology that allows assessors to log concerns about provider and policyholder behavior so that patterns and repeat offenders can be identified. Providers flagged by these systems should be challenged.
Legal issues
When fraud becomes a criminal offense, insurers should consider reporting appropriate cases of suspected fraud cases to local law enforcement authorities, recommend prosecution, and be prepared to assist in providing sufficient reliable, admissible, and credible evidence that could produce a realistic prospect of conviction.
Insurers should not shy away from pursuing such cases. Prosecution of insurance fraud is in the public interest, especially if amounts involved are substantial, or if the accused has a previous record for fraud or is accused of multiple instances of fraud. Insurers choosing to go this route should work with their legal teams to understand evidentiary requirements and engage with law enforcement and prosecutors as appropriate to assist in the prosecution.
Conclusion
Fraud, waste, and abuse are highly prevalent in health insurance, and claims teams must be constantly vigilant. Technology can be an effective identification tool, but insurers will also require bulletproof policy language as well as appropriate human intervention to challenge and combat these activities. Where appropriate, insurers should also work with regulators and prosecutors to bring perpetrators before the courts.
Global Health Brief
Issue 23; May 2024
Fraud, waste, and abuse. Prevalence of all three of these challenges is constantly on the rise for healthcare providers and insurers, leading to materially increased costs for payers, be they consumers, government bodies, or insurers. This makes it vital for claims professionals to be consistently aware and conscious of how medical treatment costs are set and reimbursed as well as best practices around treatment, hospitalization, and more. In this way, strategies can be developed that may efficiently and effectively identify and mitigate all three.
Fraud, waste, and abuse can also be either planned or opportunistic. Planned actions are more likely to meet legal definitions of fraud as there would have been premeditated intent to gain. Opportunistic actions of this sort, on the other hand, are more likely to be viewed as waste or abuse. Waste, for this instance, can be defined as “providing a health service carelessly or extravagantly or to no purpose,” and “abuse” as “using or doing something for the wrong purpose in a way that is harmfully or morally wrong.”
Although the waste and fraud definitions are not legal language, certain opportunistic actions can meet a legal definition of fraud.
The bottom line is that fraud, waste, and abuse can all result in unnecessarily increased claims costs. Insurers require controls, processes, and strategies to detect and combat all three, as each can be perpetrated by several healthcare stakeholders, including medical care providers, physical and mental health therapists, insureds, and parties with no connection to the claim.
Sincerely,
Dr. Steve Woh Medical Director and Health Claims Global Medical
A false representation that has been made knowingly, without belief in its truth, or recklessly.
U.K.’s 2006 Fraud Act
Non-disclosure >
Misrepresentation >
Phantom billing >
Overutilization >
Overcharging >
Duplicate claims >
Unbundling >
Upcoding >
Identity theft >
Kickbacks >
Billing for the same service more than once. This can either be malicious, with the intention of securing double payment, or accidental, such as when a provider resubmits previously billed charges if they were unaware of the status of the claim or if settlement is delayed.
Providers not using a procedure code but rather claiming for each individual element comprising a procedure in order to increase reimbursement. It can also refer to submitting multiple bills for tests and services performed within a specified time period which should have been submitted as a single bill. This type of fraud can be particularly difficult for an insurer to detect but may be identified through analysis of treatment patterns.
Providers submit a billing code for a more expensive service than was provided. A physician, for example, may examine a patient briefly but will submit a code bill for a complex hour-long visit. A provider may also bill for a high-cost branded pharmaceutical item while dispensing a lower-cost generic, or a doctor may provide a diagnostic procedure and then bill for a therapeutic one.
An insured person’s identity is used to claim for medical services provided to an uninsured person, e.g., claiming for an uninsured family member’s treatment costs.
A provider receives a reward for unnecessary or inappropriate referrals, such as unnecessary specialist referrals. The reward is the fee charged for the unnecessary service.
Click on each type of fraud above to view definitions and examples.
The key role of a claims assessor today is to ensure claims are payable under policy terms. To accomplish this, insurers deploy a myriad of systems to assist in detecting fraud. Tools include exception reports, which can pinpoint claims outside of normal patterns (costs too high or overutilization), and expert rules engines, which can assist in validating and enforcing policy terms. For example, if a policy excludes psychiatric or mental health conditions, any claim with a code for a psychiatric or mental health condition could be flagged.
Insurers need to have multifaceted embedded processes and strategies in place to combat fraud, waste, and abuse.
Client-facing strategies should include strong policy terms and conditions language, especially around definitions of “Medical Necessity” and “Reasonable and Customary.” Insurers will also need ways to identify outlying items and processes, and the ability to challenge the outliers on the grounds of not being medically necessary. This means having clear assessment criteria in place and obtaining answers to specific questions from treating clinicians to learn why a recommended treatment does not follow medical best practice or a necessitated deviation from clinical protocols. If claims assessors see such deviations frequently, insurers may need the discretion to override certain inclusions.
Client-facing strategies should include strong policy terms and conditions language, especially around definitions of “Medical Necessity” and “Reasonable and Customary.”
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Misrepresentation
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Overutilization
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Non-disclosure
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Phantom billing
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Overcharging
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Unbundling
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Upcoding
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Identity theft
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Kickbacks
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