Health Care Fraud – The Costly Deception?


Insurers, regulators, law enforcement officers, and legislators have spent significant resources over the years to combat health care fraud. Based on annual estimates, however, it appears that the problem persists despite all the reported efforts.

This could indicate that healthcare fraud is on the rise and cannot be stopped. Our health system is infested by health care providers who will do anything to make a quick buck. I don’t think so.

Over two decades of experience working with regulators, insurers, and law enforcers in the health care industry, I have found that most providers are ethical, honest, and do what is right!

My experience has allowed me to see the problem of fraud from both the enforcement and provider sides. It is clear that the health care fraud problem we are facing is caused by many factors.

1. Inadequate education of health care providers in relation to coding standards and payer standards.

2. Deviant providers

3. Inadequate training of claims investigators and claim handlers in coding and provider standards.

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4. Inept claims handling and claims investigation by insurers before paying claims.

5. Insufficient communication between the provider and insurer about what is needed.

6. Lack of quality training for law enforcement officers regarding investigation of fraud in health care – from prosecution to identification.

7. Investigators who tag-along look for organizational stats can lead to inefficient use law enforcement resources.

8. Insufficient interest or commitment from prosecutors – large cases can be very problematic, but small cases can present little problems.

9. Inadequate accountability across all parts of the health care delivery chain – payer, provider, regulator, enforcer.

Insurance companies are the main victims and reporters of the fraud. They indicate that all policyholders have to pay higher premiums for it. The National Insurance Crime Bureau estimates that the average American household will spend $200 more each year on premiums in order to cover the fraud.

Insurers are extremely aggressive in reporting the cost of the problem. They reveal estimates of fraud of up to double-digit percents and billions of dollars each year. When state insurance regulators allow insurers raise premiums, these estimates and reports are very important.

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Insurers and others generally refer to the following when estimating the frequency and cost of fraud in health care: billing for services not rendered; billing for substandard or unnecessary services; billing for services that misrepresent their nature and billing for services from a misrepresentative service provider…

The wide-ranging attention that insurers are giving to health care providers, even those who are not involved in fraud, is unimaginable and could limit their ability to provide care for patients. Today, it is sad that health care providers spend more time documenting their services and defending them to a variety of sources to include regulators, law enforcement officers, and insurers than they do providing care to patients.

Healthcare fraud should be treated swiftly, seriously and responsibly. However, one should not use health care fraud as a way to gain favor at the expense of another. Insurers are in business to make money. And they do just that, making lots of money. These premiums are collected from the sale of policies to consumers who want protection against future (unknown!) losses.

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Insurers are able to inform their insureds about the doctors they can see, the treatment options they have, and the cost of the services.

Insurers may also limit the payment of health care claims by denying services provided by providers. Insurers often conduct claims-evaluations to determine if the providers’ health care services were reasonable, usual, and/or customary (UCR). Fraud, by definition, is the deliberate and willful deception of or misrepresentation about facts in order to obtain an unauthorized payment.

This evaluation would be considered fraud. This evaluation is supposed to be done in order to determine if the provider of health care misrepresented the nature and report of services received. fraud.

The UCR evaluation appears to have little to do actually with fraud fighting but all to do cost containment and the bottom-line for insurers. These evaluations do not usually identify whether the provider provided the services reported, but rather report the subjective opinions of consultants who rarely see patients. Many times, UCR evaluations can be used by insurers to reduce the billings of health care providers. This is not because the evaluations are accurate but because the provider didn’t have the necessary knowledge and resources to fight back.

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These evaluations are not effective in combating fraud and could be non-existent.

To find out if your state’s insurance regulators or health boards refer UCR evaluations to them, and if so, how many. Ask your local law enforcement officers how many cases they have investigated or prosecuted that were based upon UCR evaluations.

Ask your insurance company what percentage of their losses from health care fraud includes UCR evaluations. Ask your insurer why they are unable to pay fraudulent claims despite their obligation and ability to review all claims.

It is interesting to note that health care providers have used a standard coding system since the 1980’s. The current procedural terminology (CPT) is the system used by health care providers to bill and report on services provided to patients.

The American Medical Association (AMA), promulgated CPT so that all health care professionals, regardless of their discipline, could accurately report and receive compensation for services rendered.

CPT has been around since decades. However, there is no standard of education or training for health care providers to use the codes correctly, nor for insurers to understand what the codes mean. This could lead to a problem in the health care system as it creates an adversarial system between health care providers, payers, and patients based on the ‘attack and defence’ of billing codes.

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Both look at the codes for reporting purposes to seek compensation and one for determining how much they will pay.

If the annual reports are accurate, it should be obvious that the health care fraud problem cannot be solved by merely accumulating large amounts of resources, creating consortiums to share data and research, or by introducing additional laws or regulations from politicians trying to re-elect them. It is necessary to investigate health care fraud in order to prosecute the offenders. Not only is this necessary, but so are our providers, investigators, and insurers to be taught how to combat health care fraud.

The problem of health care fraud is too complex for a few to tackle. The problem of health care fraud requires greater involvement by the principals in our health care system to ensure that we are able to identify and verify our successes in tackling this expensive problem.

It is clear that health care fraud is a serious problem. This can only be achieved if our fraud-fighting unit is fully accountable and includes active participation from health care providers.

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Honest and ethical health care providers are the strongest voice against fraud in the health care system. They are, of course, also consumers of insurance and health care and part of the premium-paying public. Many health care providers don’t engage in fraud, and they would like to see those who do so stopped and taken out of business. In the current fraud fighting arena, health care providers, even honest and law-abiding, are being pitted against insurance companies.

In order to be paid for the legitimate services they provide, health care providers must have aggressive and intrusive encounters with their insurers. This can have a negative impact on our overall success in fighting health care fraud.

Even if they are not involved in fraud, health care providers may have the knowledge and information that could be helpful in helping to fight it. These providers may be able to assist street-level in identifying fraudsters among health care providers.

Health care providers may also help fraud fighters to establish the evidence necessary for prosecutions. With the current adversarial system, however, health care providers may not be able or willing to help fraud fighters because they are fighting payers for the mere existence of their financial well-being.

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Perhaps it’s time for the different health care providers and disciplines to form an alliance. This would allow them to act as the provider’s arm and work with law enforcement to combat insurance fraud and other health care fraud. Maybe, an alliance like this would result in a decrease in annual estimates of health care fraud costs. They currently range from $20 to $160 billion depending on their source.