Red Flags for Fraud

The American College of Healthcare Executives Code of Ethics states that the healthcare executive shall within the scope of his or her authority “prevent fraud and abuse and aggressive accounting practices that may result in disputable financial reports.”

But how can an executive even hope to detect this growing phenomenon much less prevent it?

Losses to healthcare fraud total billions of dollars according to government and industry estimates. The BlueCross BlueShield Association estimates that in 2005 $90 billion of the total of $1.8 trillion paid for healthcare costs was lost to healthcare fraud.

Fraud control remains a top priority of the U.S. Department of Justice. In fiscal year 2006 the DOJ opened 915 new civil healthcare fraud investigations and had 2016 investigations pending at the end of the year. On the criminal side the U.S. Attorney’s Offices opened 836 new criminal investigations involving 1448 potential defendants in 2006 and had 1677 investigations pending at the end of the year. These cases involve hospitals pharmaceutical companies nursing homes laboratories durable medical equipment suppliers ambulance service companies as well as physicians and other healthcare providers. In fiscal year 2006 the federal government won or negotiated approximately $2.2 billion in judgments and settlements involving fraud cases.

The Health Insurance Portability and Accountability Act of 1996 defines healthcare fraud as knowingly and willfully executing a scheme to defraud a healthcare benefit program or obtaining “by means of false or fraudulent pretenses representations or promises any of the money or property owned by … any healthcare benefit program.”

Fraud in the industry can be committed at every step of the healthcare delivery process.

The role of technology
The rise of technology in the billing arena can actually facilitate fraud opportunities. Highly automated claims processing without proper human oversight can make it easy for an individual to test the system and once they find the proper combination of codes and pricing that passes cleanly through increase the number of claims using different patients and different payers. Increased technology calls for increased fraud detection and prevention programs.

On the flip side insurers have begun to use technology to identify potential fraud before claims are paid by flagging unusual patterns. “Borrowing techniques from financial and credit services” says USA Today “Medicare and private health insurers are increasingly mining claims data for suspicious patterns comparing practitioners with their peers and larger databases of claims.”

Another key factor: coding

”