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Identifying Fraud

October 16, 2007
by Barry Johnson, DDS
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Finding fraud in a mountain of claims takes more than just technology; it takes people too.

Preventing fraud, abuse and overpayments is an increasing challenge for payers. The complexity of the healthcare system's billing procedures and frequent code and rules updates presents vulnerabilities and provides many opportunities for billing mistakes. These factors are part of the reason up to $230 billion is lost to healthcare fraud, abuse and overpayments annually, according to the National Healthcare Anti-Fraud Association (NHCAA).

Fraud is dynamic and invisible by nature, which makes it very difficult to detect and prevent. By the time a scheme is identified, the offender has already modified their tactics. The rapidly changing aspect of fraud is why software systems alone cannot solve the problem. Software cannot identify patterns it was not programmed to look for and it cannot resolve problems that require subjective evaluations. Software's limitations make it crucial to incorporate human thought and analysis.

The key to an effective fraud, abuse and overpayment protection program is to incorporate a combination of medical code editing and fraud identification software tools coupled with hands-on review of claims by medical fraud specialists, M.D.s, R.N.s and certified coders into the claims management process. In addition to a comprehensive, proactive, prepayment analysis program, four additional measures payers can implement today include:

1. Scrutinize 100 percent of Claims: Each fraudulent claim that is paid encourages the offender and promotes repeated occurrences of the activity. If every claim is thoroughly evaluated, payers can ensure only the valid claims are paid.

2. Assign Responsibility: Any effective approach to reducing fraud and abuse must be specifically assigned to a department that is accountable for fraud prevention. In most payer organizations, it is either a claims audit department or a special investigative unit. This responsibility should not be assigned to the claims department, their objective is to pay claims in a timely manner and fraud prevention activities often slow that process.

3. Focus on New Emerging Practices: In order to get ahead of the fraud perpetrators, initiate processes that continually probe for new and emerging schemes. While intelligent software applications can detect changes in billing patterns, rules based software will not detect new schemes. Human oversight and analysis must intervene in order to rule out the numerous false positives that result from predictive modeling approaches. Trained clinical analysts have the unique ability to detect aberrant billing patterns with a single occurrence because an unusual claim submission will trigger suspicion if it represents unsound clinical management or if it is inconsistent with the logical treatment of a specific condition.

4. Commit to Action: Some payers believe it is easier and less expensive to pay claims rather than investigate them. This is a false belief. According to the Health Insurance Association of America, insurers can save $11 for every $1 they spend fighting fraud — an average of $5.5 million per company. Payers who commit to preventing fraud and abuse and implement the above suggestions could save money and help quell the escalating problem.

In this day and age when technology is integrated into business systems wherever possible to lower costs and promote processing efficiency we cannot lose sight of the important and irreplaceable aspect of human analysis. Most fraud prevention software systems that identify a fraudulent claim are only correct about 25—30 percent of the time. Investigating false positives wastes scarce resources. If payers combine advanced software with human analysis, 85 percent of false positives can be eliminated. Software systems can be fooled; experienced, trained clinicians combined with software are needed to combat this vast problem.

There is a misconceived notion that anti-fraud, abuse and overpayment programs are complicated and take too much time to implement, but they do not have to be daunting at all; rather they can be quickly and seamlessly integrated into the claims management process and can prove to be one of the biggest factors in containing costs. I guarantee that if you implement a program, as I have described, you will see significant improvements to the bottom line.

Barry Johnson, DDS, is CEO of Sandy, Utah-based HealthCare Insight.