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The most common types of healthcare fraud


Fraud, waste, and abuse are a major threat for healthcare around the world. An estimated $455 billion in global healthcare spending is lost every year due to fraud, waste, and abuse (FWA). In the United States, FWA (and the extra rules and inspections required to fight it) cost Medicare and Medicaid $98 billion in 2012, raising their total spending by 10% – and in the EU, FWA drains €56 billion out of the healthcare system every year. The World Health Organization lists FWA among the leading causes of inefficiency in worldwide health.

Healthcare fraud infographic of the flow from the payer to the wasted budget of hospitalsHealthcare payers are the first to be affected – FWA cuts into their bottom line. So they have to charge higher premiums or taxes, and pay healthcare providers lower rates. When private payers have to renegotiate with providers, their networks end up shrinking, which is even worse for business. Ultimately, FWA leads to smaller budgets for providers, lower quality of patient care, and higher costs for everyone through premiums and taxes.

Although everyone is affected by FWA, payers are alone on the front lines: they are the first to feel the pain, and they are the primary party tasked with identifying and preventing improper claims from being paid. The more healthcare payers are familiar with different types of fraud, waste, and abuse, the better job they can do preventing it.

Common types of fraud

Let’s start by defining what we mean by fraud, waste, and abuse. Waste and abuse are characterized by careless practices that do not conform to good clinical practice and divert money away from treatment, but are not necessarily carried out with criminal intent. Fraud, on the other hand, is an intentional deception or misrepresentation made with the purpose of collecting unauthorized benefits. There are several all-too-common types of healthcare fraud that payers need to be on the lookout for.

Billing for services or items not furnished – This is a straightforward and intentional act on the part of a healthcare provider. Whether billing for a patient appointment that never actually happened, or for medical devices that the doctor did not supply, this common form of healthcare fraud is one way providers can unscrupulously divert funds away from treatment and into their own wallets. For example, one manufacturer of orthopedic materials in Belgium was found guilty last year of forging prescriptions to double the knee braces for which it could bill.

Upcoding – When healthcare providers bill for products or services that are more complex and expensive than the ones actually provided, they are guilty of upcoding. Sometimes this happens on accident, when a provider simply enters an incorrect code by mistake – but often, it’s an intentionally fraudulent action. One example is EndoGastric Solutions, Inc. The medical device manufacturer produced a device that could be implemented either with a simple procedure or a more expensive, invasive one. In 2014, the company was found guilty of advising surgeons to bill for a more expensive and invasive surgery than was actually provided.

Unbundling – Similar to upcoding, unbundling is the practice of submitting bills in a fragmented fashion in order to maximize the reimbursement for tests or procedures that should be billed together at a reduced cost. For example, a hospital lab might perform a panel of blood tests for a patient. Instead of billing for the whole panel, the lab might try to increase their revenue by billing for each test individually.

Providing unnecessary services – Perhaps the most sinister example of healthcare fraud is providers performing unnecessary procedures on patients, against their best interests, in order to reap financial benefits. In 2015, one doctor received 45 years in prison for administering chemotherapy to healthy patients who didn’t have cancer. He had fraudulently collected $17.6 million from healthcare payers for his treatment, endangering dozens of lives in the process. Most examples of this form of fraud are not so extreme. It doesn’t make headlines when a surgeon recommends knee surgery instead of exploring less invasive options like therapy first – but this sort of widespread, low-level fraud drains money from healthcare funds and harms patients. The fact that physicians perform thousands of medically unnecessary surgeries each year is both a major abuse of trust, and a significant driver of unwarranted spending.

Doctor shopping – A side effect of the proliferation of prescription pain medication in the United States has been the occurrence of doctor shopping: when patients visit multiple doctors to obtain multiple doses of controlled substances. These drugs are either overused by the patient or illegally distributed to others. In 2015, opioids killed more than 33,000 people in the US, more than any year on record – and nearly half of opioid overdose deaths involved a prescription opioid. Rates of prescription opioid addictions are rising in Europe as well. The proliferation of prescription opioids is somewhat related both to deceitful behavior on the part of patients and careless prescribing practices by physicians. Some providers take measures to prevent doctor shopping, but others do not have sufficient safeguards in place.

Medical identity theft – The digitization of personal health information (PHI) has led to countless benefits for the healthcare industry that are improving care and increasing efficiency. However, it has also exposed PHI to greater risk of theft. The misuse of a person’s medical identity to wrongfully obtain healthcare goods, services, or funds is an all-too-common crime. Last year alone, the number of cases of medical identity theft in the US jumped 21%, with each incident costing victims an average $13,500 to fix.

Screening claims for fraud, waste, and abuse with CGI ProperPay

Each of these types of healthcare fraud is dangerous – and each one requires sophisticated screening techniques to detect and recover lost payments. Healthcare payers need a powerful, data-driven tool that can help them to navigate claims fraud.

CGI ProperPay for claims analytics, built on Microsoft cloud technology, is the powerful analytics solution that healthcare payers need to fight FWA. CGI ProperPay analyzes healthcare claims with the powerful Cortana Intelligence Suite, using historical trends to identify anomalies that could signify improper claims. Over the last five years alone, CGI ProperPay has helped healthcare payers to identify and recover $2.5 billion in improperly paid claims.

And this year, the solution has been entirely rebuilt to function on the highly secure Azure cloud. In addition to fighting FWA perpetrated by providers, CGI ProperPay ensures that all PHI is kept safe from the threat of medical identity theft.

Learn more about CGI ProperPay for claims analytics today on the Microsoft AppSource marketplace.