Property Casualty Medical Fraud, Waste Rampant

By Denise Johnson | October 14, 2015

Fraud continues to be problem for the insurance industry and medical fraud, in particular, is growing according to Andy Tolsma, solutions manager for the P&C Medical Fraud payments accuracy division for Verisk Health.

Industrywide 10 percent of all P&C have a fraud, waste or abuse component to them, he said.

During a recent webinar on the subject, Recognizing and Combatting Medical Fraud, Waste and Abuse in P&C, Tolsma outlined the ways medical fraud is perpetrated and ways it can be identified and controlled.

He offered some eye opening statistics. It’s estimated that $234 billion goes to medical fraud, waste and abuse in the healthcare system annually – that’s $28.5 million an hour.

In the P&C industry the problem is growing rapidly. It’s just too large to ignore, said Tolsma. In 2000, fraud accounted for 10 percent of P&C spend. In 2015, fraud accounts for 30 percent.

P&C medical fraud costs an estimated $30 to $50 billion annually. In worker’s compensation, $5 billion annually is attributed to fraud with 30 percent of that attributed to prescription fraud and abuse.

Not surprising, personal injury protection (PIP) fraud totals $6.8 billion annually. Tolsma said that one in four PIP claims in New York have a fraud component, while one in three in Florida do. The Florida Office of Insurance Regulation reported no-fault fraud and abuse cost the state’s consumers and insurers about $658 million in 2011.

According to the Verisk solutions manager, waste can be found in charges related to high diagnosis and duplicate billing. Abuse can be found in upcoding, modifier abuse, split billing and unbundling services. Fraud is found in excessive or unnecessary testing and prescriptions, falsifying diagnoses and charging for services not rendered.

Tolsma outlined the following examples of fraud, waste and abuse:

  • Misidentified procedures;
  • Cost shifting;
  • Drug seeking;
  • Identity theft – patient or provider;
  • High times – when a provider bills for more hours than are in a day;
  • Template billing – everyone seen is billed for the same procedures and diagnoses;
  • Specialty procedure and diagnoses codes mismatch;
  • Upcoding;
  • Evaluation and maintenance codes by PTs and MTs;
  • Boiler plate billing;
  • Accelerated treatment path – Evaluation and maintenance, MRI then surgery;
  • Modifier abuse – code 59 is commonly used indicating more work so extra charges.

The Washington State Department of Labor & Industries offered additional red flags on its website, including:

  • Providers who bill for treatment on consecutive dates for minor injuries;
  • Providers who work with the same attorneys that often seem to represent questionable claims;
  • Providers who bill for unnecessary medical equipment;
  • Providers who pays for patient referrals.

Tolsma provided an example of high times, where one provider was found to have billed for 28 hours of work in an eight or nine hour day.

Another area of medical services where a tremendous markup can be found occurs when doctors prescribe and dispense drugs – Tolsma has seen a markup as high as 1500 percent.

Insurance Research Council data released earlier this year found that claims with possible fraud and/or buildup were more likely to include chiropractic treatment, physical therapy, alternative medicine and pain clinics.

With the changes to the U.S. healthcare system over the past few years, there is evidence of a trend towards cost shifting from group healthcare to the P&C industry. Tolsma said that doctors are trying to make up for lost revenue by charging more in workers’ compensation and auto cases.

In order to identify and measure the impact of fraud, waste and abuse in claims, carriers need to use an innovative, multidisciplinary approach.

He recommended carriers:

  1. Gather accurate information – all available treatment and diagnostic codes, confirm provider and patient entities (make sure they are who they say they are). Some providers may be misidentifying themselves on purpose. An example, one single provider was connected to 80 different entities.
  2. Utilize multiple analytical disciplines to ferret out fraud schemes.
  3. Use clinically evaluated tools (like those created by the American Medical Association) and know that human validation and data enhancement is necessary to reduce false positives.

Public private partnerships between carriers and law enforcement and other organizations is the key to combating fraud. In addition, Tolsma said that carriers should consider aggressively pursuing perpetrators and lobby for change.

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