by
Jim Marasco , CPA,CIA, CFE
Director, Corporate Services
StoneBridge Business Partners
From Fraud Matters, Winter 2010 - published by CPAmerica
As the debate over national healthcare reform wages on, another topic has started to receive notoriety. Healthcare fraud is running rampant.
The National Health Care Anti-Fraud Association estimates 3-10 percent of the nation’s annual healthcare outlay is lost to fraud and abuse. Healthcare costs have become one of the fastest growing costs to organizations.
Understanding the frauds being perpetrated will assist in their prevention and detection. If left uncontrolled, your organization, along with the rest of the system, will be left footing the costs.
The Largest Victim
The Medicare system spent $2.5 trillion in 2009. Fraud doesn’t lurk too far behind. The latest estimates from the Center for Medicaid and Medicare Services indicate that the government’s exposure to fraud and abuse within this program is over $100 billion annually.
The two common types of healthcare fraud are:
- Consumer Related
- False Claims - Deceiving insurance companies and state worker’s compensation programs by falsifying injuries
- Medical Identity Theft - Using another’s medical benefits to obtain services personally
- Physician Shopping - Moving between doctors to obtain multiple prescriptions
- Provider Related
- Kickbacks - Accepting kickbacks for patient referrals
- Phantom Billing - Billing for services that were never performed
- Pharmacy Fraud - Dispensing less than the prescribed and charged amount of a prescription
- Unnecessary Care - Providing and charging for services that are not needed
- Unbundling - Charging separately for procedures that are actually part of a single procedure to increase the reimbursement
- Upcoding - Charging for a more expensive service than what was actually performed
Recent Developments
The federal government is starting to realize that false claims by those with Medicare provider numbers represent one of its largest exposures. Medicare participant lists are being sold on the streets to fraudulent suppliers who submit claims to Medicare for anything from artificial limbs to power wheelchairs. By the time their ruse is discovered, they have folded up their tent and moved elsewhere, defrauding the government of millions.
Insurance companies have also become unsuspecting victims. Criminal rings are operating fraudulent "health clinics" in states with weaker regulations. These clinics attract patients with lucrative “out-of-network” coverage and perform either needless procedures or charge for ones not performed. The insurance company then has the burden of chasing an out-of-state provider to determine its legitimacy, which could prove to be time-consuming and costly.
One control that was created years ago to assist consumers has now become one of the greatest tools available to fraudsters.
The Health Insurance Portability and Accountability Act (HIPAA) was originally passed in 1996 and started to become effective between 2003 and 2005 for the privacy and security aspects of the act.
This legislation was originally intended to prevent the unnecessary use of a patient’s healthcare information from being used for marketing or other inappropriate purposes. It has now become the greatest shield for perpetrators of fraud. The rules have become difficult and complex to work through for those trying to independently audit for healthcare fraud and abuse.
The Effects on Your Organization
Fraud perpetrated against the Medicare and Medicaid systems directly drains the taxpayers of this country. Medicare is funded through a payroll tax on both the employer and employee. As more funds are needed, taxes are raised. Thus, everyone employed is affected.
If your organization has a company-rated healthcare plan, fraud affects your claims history, which will directly affect your rating and corresponding premium amounts. For self-insured plans, fraudulent claims directly steal from you.
Some Safeguards Against Fraud
The best way to quell healthcare costs and related fraud is increased vigilance in what is being charged. Educate your employees who are on your plans. Each time they visit a doctor or have a service performed, a bill or claim is submitted to the insurance company or Medicare. The claim lists the services provided, when they were provided and who provided them.
When the insurance company pays the claim, a report is sent to the participant called an Explanation of Benefits outlining what was paid. Participants should carefully review these for accuracy. Discrepancies or suspicious activity should be immediately reported to the insurance company or Center for Medicare Services, if Medicare related.
If you monitor your own claims activity, then you should be paying close attention. Out-of-network providers may be subject to different reimbursement rates and may use this to their advantage.
Examine your claims activity for high patient activity or similar procedures performed on plan participants by similar providers. If a third-party claims processor is retained, ensure they are qualified and competent, and analyze the claims for suspected fraudulent or duplicate activity.
Everyone must do a better job of asking questions and understanding the basis supporting the fees assessed to us.
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