SmartLight Analytics

ANALYTIC EXPERTISE - CLINICAL EXPERTISE

fraud

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Avoiding Healthcare Fraud in the COVID-19 pandemic

There is no question employers with self-funded plans will see increases in the cost of healthcare due to infected employees (and their family members) during the COVID-19 pandemic. Those paying for the higher costs  hope to avoid being the target of fraud, waste and abuse while the country’s doctors and hospitals fight the virus. However, in a time of crisis, while our primary focus is elsewhere, history teaches us that specific areas in our healthcare system could be ripe for additional deceptive billing schemes.  

Strong public sentiment is pushing employers and insurance companies to reduce restrictions on accessibility to treatment during the pandemic, which is well-intended and necessary to save lives. Self-funded employers who determine the coverage guidelines of their employee’s health plan want to make it easier for members to get life-saving treatment during this crisis. However, you can be certain that bad actors – those intentionally submitting improper claims within the existing system – won’t let a national tragedy go to waste. As oversight of medical claims becomes necessarily less restrictive in preparation for the increased volume of appropriate healthcare claims, the number of fraudulent claims will also increase.

The five areas most susceptible to abuse and intentional fraud during this pandemic are:

  1. Prior authorization: AHIP is reporting many insurance providers will waive prior authorization for services so patients can be treated quickly. Prior authorization serves as a gateway to expensive procedures because it requires healthcare providers to obtain advanced approval to qualify for payment overage. Even before the pandemic, fraudulent providers were exploiting the existing prior authorization process to obtain coverage for non-covered prescriptions and medical services with false or misleading information. The relaxing of existing requirements along with the inevitable increased volume of claims due to COVID-19 will make the prior authorization process an easy target for fraudulent billing. 1
  2. Out-of-network expenses: Again, with the well-intention of reducing travel time and consequently unnecessary exposure to the public, most payers are likely to waive their out-of-network penalties to reduce the spread of the pandemic. Expanded out-of-network payment coverage will allow members to receive treatment from the closest doctors and hospitals. However, with unregulated payment rates, there is a high potential for substantial wasted spend among OON claims. Expect bad actors to take advantage. Payers should be wary. 2
  3. Billing for non-rendered services: Billing for services not rendered, called “phantom billing,” was a recognized problem in claim payments long before coronavirus became a household name. This fraudulent practice is seen when  unscrupulous  providers submit bills for services that were not rendered. Patients who are victims of phantom billing are often unaware of the claims submitted against their plan coverage. It is important to keep in mind: while the need for healthcare is increasing, the need is not evenly distributed. While infectious disease and pulmonology specialists should expect a substantial rise in demand, other office-based practices, like chiropractors, or podiatrists could see a decline in patients while the country practices social distancing. However, fixed costs of running an office will remain, providing a motive for some to “maximize” each visit. Employers will pay the price if such billing goes unchecked.3
  4. Lab testing:  Testing for COVID-19 is in high demand resulting in a foreseeable spike in laboratory billing for the duration of the pandemic. In fact, shortage of labs available to conduct the testing necessary to fight the virus has led to newly formed public and private partnerships.4 It is also true that laboratory testing is a highly abused part of the  US healthcare system. When it comes to lab testing, medically unnecessary claims have been an expensive problem for all payers, insurance companies and self-funded employers. Recent cases of fraud in urine drug testing (“liquid gold”) and pass-through lab billing have cost employers millions in the last few years. 5 Expect fraudulent out-of-network laboratory billing to become even more attractive to those looking to dupe the system.
  5. Member eligibility:  The numbers of uninsured in the country as a whole and especially states with large population centers, like Florida and Texas who consistently rank at the bottom, are likely to see abuses of member coverage in the face of increased healthcare needs. Using someone else’s insurance card or adding ineligible members to a policy holder’s plan are forms of member eligibility fraud.6 Those managing the health plan membership rolls should keep a watchful eye on eligibility if the pandemic drags out for many months.

In order to mitigate these five areas of exposure, self-funded employers should first increase awareness of the potential abusive areas. The best defense against becoming a victim of healthcare fraud is to be vigilant about knowing how plan dollars are being spent. Plan administrators (whether small TPAs or larger carriers) may be able to provide the additional scrutiny needed, but as they deal with the rise in claims, extra assistance is likely. Administrators dealing with a massive influx in claims will have less resources available than usual to dedicate to finding and preventing waste in the system.  

Analytic experts in mining healthcare population data, who understand the ins and outs of claims adjudication can become a useful resource in identifying suspect areas. Using inferential analytics to look at what’s below the surface at a time when claims are skyrocketing will become more important than ever. When the rules are changing fast, searching for fraud and abuse needs an innovative approach, not the traditional rules-based methods. 

Even before the COVID-19 outbreak, it was predicted employers would pay more for healthcare coverage in 2021, as much as 5-6% more. Now with the COVID-19 pandemic, that cost will skyrocket. A few ill-intentioned players are already pushing the envelope in our complicated healthcare system; this pandemic will only exacerbate that problem. Unnecessary medical spend in the form of fraud and abuse impacts all employees via reduced coverage and higher premiums.7 Self-funded employers should take the extra steps to identify and eliminate the waste that’s certain to increase during this global crisis. After all, fraud left undetected can have far-reaching impacts on your organization’s ability to weather the downturn. Attacking fraud, waste, and abuse offers a huge cost savings opportunity for a relatively low investment.

  1. Health Insurance Providers Respond to Coronavirus (COVID-19). AHIP. Mar 30, 2020
  2. Medicare Is Updating Coverage to Help in the Coronavirus Crisis. The New York Times. Mark Miller, Mar 24, 2020
  3. HealthCare Fraud. HealthCare Business & Technology. Catalyst Media Network: healthcarebusinesstech.com. 2019
  4. Bottlenecks in Coronavirus Testing Mean Excruciating Wait Times for the Sick. Los Angeles Times. Melody Petersen and Emily Baumgaertner, March 30, 2020
  5. Liquid Gold: Pain Doctors Soak Up Profits by Screening Urine for Drugs. Kaiser Health News. Schulte, Fred and Lucas, Elizabeth. November 6, 2017
  6. Key Facts about the Uninsured Population. Kaiser Family Foundation. Jennifer Tolbert, Kendal Orgera, Natalie Singer, and Anthony Damico. December 13, 2019
  7. COVID-19 Could Prompt Higher 2021 Insurance Premiums, Benefit Cuts. Modern Healthcare. Shelby Livingston, Mar 23, 2020

Asha George is the co-founder of SmartLight Analytics, a healthcare data analytics company. Prior to founding the company, she spent 17 years creating payment integrity solutions for multiple healthcare companies, including  insurance carriers. She has a master’s degree in public health with a concentration in biostatistics and  epidemiology. Asha founded SmartLight Analytics to deliver a solution that meaningfully reduces fraud and abuse in healthcare spend. SmartLight uses statistical, clinical, and data expertise to deliver the most complete wasteful spend reduction solution directly to self-funded employers.

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Finding wasteful spending in healthcare: A Female Founder’s Journey

A study released late last year estimated between $760 billion and $935 billion spent on healthcare in the U.S. is waste. That’s 25% of the total costs of healthcare according to estimates published on JAMA Network.1 Further broken down, the study found between $58.5 billion and $83.9 billion are a result of fraud and abuse, with another $76 billion plus wastefully spent on overtreatment or low-value care. With such staggering numbers, finding a way to reduce even a fraction of the fraud, waste and abuse could save employers millions each year.

As employers struggle to provide competitive benefits in the current economy where the jobless rate is low and healthcare costs continue to rise, turning inward to look at spending on healthcare is not only a recommended action, it is a fiduciary responsibility. It behooves a company to not only provide the highest quality benefits overall, but to make sure the money invested on health benefits is not wasted unnecessarily on issues like billing errors, abusive use of the emergency department, testing for medically unlikely scenarios, or on intentional fraud.

During the past two years, SmartLight Analytics has found patterns of such wasteful spending for employers across all industries. Examples of potential savings found for just three employers, each with more than 12,000 employees/family members covered under self-insured healthcare plans, ranged from $4 million to $8.9 million. The analytic healthcare data reviews showed some of the main sources of this waste includes:

  1. Fraud in the form of schemes like pass-through billing
  2. Waste on such things as hormone therapy misuse
  3. Overuse of emergency rooms
  1. “Waste in the US Health Care System: Estimated Costs and Potential for Savings,” William H. Sharnk, MD, MSHS; Teresa L. Rogstad, MPH, Natasha Parekh, MD, MS. October 7, 2019, JAMA Network

So how exactly is money being wasted on these things? Pass-through billing schemes, for example, can happen under the radar and go relatively unnoticed. In many cases, it involves doctors referring routine lab tests to rural hospitals, which are reimbursed at a higher rate, rather than sending them to local hospitals or labs. Doctors receive a kick-back and the rural hospital – which may often be struggling — is fed more business. In March 2019, the CEO of a Texas hospital pleaded guilty to a pass-through billing scheme involving more than $55 million in fraudulent claims. That is an extreme example, but more common examples exists in employer’s data regularly. One detailed clinical review of claims by analytic experts in 2019 found the exposure of pass-through billing for one employer to be more than $688,000 over two years.

Waste can be found in many forms in healthcare claims, but one form frequently identified is the misuse of testosterone therapy for male patients. A review of one employer’s healthcare claims data showed multiple provider groups fitting the suspect pattern of wasteful spending on testosterone replacement. Such a practice involves doctors treating patients for low testosterone levels, when in fact, the levels are not low enough for treatment. I can also take the form of excessive treatment and/or office visits for such unnecessary treatments. Regular analytical reviews by SmartLight Analytics found several providers were identified that appear to be supplementing their revenue by billing unnecessary office visit codes during every patient visit or providing unnecessary treatment. This extreme example was based on claims over a 30-month time period for approximately 500 members of a single employer. Exposure of billing of hormones was estimated to be more than $1.1 million for the employer.

Finally, ER overuse remains an issue when it comes to wasteful healthcare spending. Employers often find that a few “superusers” can drive up their healthcare costs excessively. However, identifying and working with those employees to find out why they are using the ER – whether it is for a chronic disease, addiction or lack of available primary care – can prove effective in eliminating this cost. One employer review identified a small number of superusers — 0.2% of the total number of covered employees for that employer – were spending $1.8 million on ER care. Taking action to identify and work with those employees could mean significant savings.

While the idea of eliminating fraud, waste and abuse is logical, most companies are not equipped to find where those issues are happening within their healthcare spend. Claims administrators focus their work on processing and paying claims, leaving the reviews left undone. Finding a third-party to work with claims administrators to regularly review claims can result in the identification of suspected patterns of waste or statistical outliers which can indicate abuse or fraud even. Such a collaboration will help companies take steps to remediate fraudulent claims or prevent further waste from happening.

Why Asha George started SmartLight Analytics 

As an experienced healthcare analyst with an academic background in epidemiology and biostatistics, Asha George watched as healthcare costs continued to rise and knew the trend was unsustainable. She saw a focus on government overspending and waste in healthcare spending but did not see much attention being paid to the commercial side of healthcare. 

“I had an insider perspective,” she said having spent 17 years working as an independent statistical consultant for multiple healthcare IT companies, directing Statistical Analytics teams, and developing and implementing predictive analytics products for large insurance carriers. She knew the numbers. “I had worked inside the industry and I knew that more and more companies were going toward the self-funded model for healthcare, yet they had little awareness of how their dollars were being spent.” 

George knew there was waste, felt passionate about the need for transparency and saw a market for helping companies deal with this issue. She talked to experts in the field from physicians to data statisticians to healthcare lawyers about her idea. They all agreed there was an issue with fraud, waste and abuse and a void to be filled in the market. In fact, there were indisputable numbers backing up her concept of a need for attention in this space.  

So, she went to work carving out a business plan and a business model working to focus her work on helping self-funded employers reduce their healthcare spending. She found a partner — a clinical expert who shared her passion about making a difference in this space of healthcare spending — in surgeon Dr. Franklin Baumann, who had also worked on the insurance side of healthcare. Together they knew there was real value in what they wanted to do with the unique solution SmartLight Analytics developed to help companies reduce healthcare costs.  

The idea was quickly confirmed when the first employer they approached said yes to their solution in the first meeting. That was in 2016. They found their first big obstacle in getting access to the healthcare data they needed in order to analyze claims and identify areas for savings. It was an obstacle that seemed insurmountable at first. But with the help of a strong advocate in their first client, Dean Foods, they were able to obtain the data they needed to get to work. They used that roadmap for future clients and learned how to work effectively with the different parties involved.  

“We learned quickly what didn’t work; we now look at ourselves as a partner with the insurance carriers,” George said. “We fill in the gap to provide the best service for our mutual employer clients.” 

As a female in the healthcare IT industry, George knows she is a rarity and there are not many women at the tables she shares. Though she did have one meeting with a potential client where she was largely ignored and questions were directed to her male business partner only, which was unexpected – she said she does not think much about being a female role model or pioneer.

“I don’t think much about being a female entrepreneur, but a friend of mine who is a female entrepreneur was giving me the statistics that less than 2% of women-owned start-ups have revenue over $1 million and I was shocked.” 

She chose to designate SmartLight Analytics as a “Certified Women’s Business Enterprise” specifically so she could represent the small number of women working in the healthcare IT field.   

As for the future of SmartLight Analytics, George knows there are endless opportunities to serve self-funded businesses in reducing their healthcare spend. She is also positioning SmartLight to be a software solution company.

“Right now, we are providing a needed service, but we will ultimately be a software company.” 

Published Feb. 25, 2020 for the Texas Healthcare Challenge blog

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“Rehab resorts” recruit patients

Fraudulent claims from rehab facilities that function more as resorts, recruiting patients and even paying commissions for admissions, seems to be a growing trend.

Our past findings have been consistent with recruiting and clearinghouse practices well documented among some rehab centers. In such centers, patient recruiters typically receive payment from the rehab centers for each patient they obtain that generates revenue. Predatory marketing practices often involve a misrepresentation of the services offered and the auctioning of patients through clearinghouses. The clearinghouses route patients to call centers, and once the patient’s insurance is verified the clearing centers act as brokers auctioning off the patients to the highest bidding rehab centers.

“Rehab operators have told the Southern California News Group (which investigated the addiction industry in 2017) that they know it’s wrong to offer money to middlemen in exchange for well-insured patients, but that the practice is so ubiquitous in California they’d have no patients at all if they stuck to the high ground,” according to the piece titled, “Rehab patient brokering is rampant, but it’s hard to stop, industry says,” published in the Orange County Register on May 30, 2018, and written by Teri Sforza, Tony Saavedra and Scott Schewebke.

“Addicts start to see their insurance cards as credit cards, operators said, demanding better food, cell phones, even cash from providers in exchange for staying in treatment. If the provider doesn’t deliver, the addict bolts to a different treatment center that will give him more of what he wants,” the article stated.

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Pass through billing schemes

“Healthleaders Media” recently reported on a case involving pass-through billing in Florida which highlights how such schemes can grow if undetected during regular claims reviews.

The case involved the owner of a substance abuse treatment facility who sent his patients’ urine samples to a lab that returned 40% of the insurance reimbursements to the owner. He then arranged with the managers of two rural hospitals in Florida to have the testing billed to private insurers at a higher reimbursement under the hospitals’ in-network contracts.

The scheme expanded to include rural hospitals in Georgia, and more drug rehab centers, resulting in laundering more than $57 million in illicit reimbursements.

Rural hospitals, often due to declining revenue, have been repeatedly identified in fraudulent and abusive billing schemes intended to increase revenue. Vigilance by those processing claim payments is required to prevent wasted dollars from being spent. SmartLight has identified multiple schemes involving suspect patterns of urine drug tests and pass-through billing.

Rural hospitals involved in pass-through billing to maximize reimbursements from claims administrators is a growing problem. SmartLight has identified over 7 hospitals in Texas and neighboring states involved in this abusive billing scheme in 2019. Analysis of claims data using inferential methods can quickly identify these suspect claims in an employer’s healthcare claims population.

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CASE STUDY: Uncovering potential abusive billing

June 2019
 

During monthly monitoring of a client’s claims, the SmartLight Analytics’ team identified potential abusive billing by a licensed in-network physician who owns a family practice in Texas. The issue was identified due to an abnormal billing pattern in comparison to provider peers.  The suspicious claim pattern included repeated payments for injections without any associated drug codes stretching over a 9-month billing period.

The provider also reported an inconsistent diagnosis of chronic kidney disease for a patient, with no follow up service related to this diagnosis seen anywhere in the patient’s medical history. Additionally, this provider began billing allergy testing and antigen therapy preparation and injections for this same patient.

Records review of this provider’s billing showed references to numerous potentially excluded, unproven and non-medically necessary services including testosterone replacement therapy for male menopause, laser face lifts, laser hair and tattoo removal, laser-lipo body contouring, Botox and chemical peels. Claims not meeting medical necessity and coverage guidelines will be denied for this provider and credited back to the employer’s plan funds.