We’ve answered some of your questions about fraud, waste and abuse in your self-funded healthcare plan
Q. HOW DO YOU DEFINE FRAUD, WASTE AND ABUSE IN HEALTHCARE CLAIMS?
A. SmartLight Analytics defines fraud, waste and abuse fairly straightforwardly. Fraud consists of any claims shown to involve schemes by providers or members that are illegal. Abuse in healthcare claims is mostly commonly found in situations such as ER abuse where members use the ER excessively or for inappropriately for primary care. And, finally, waste is exactly what it sounds like. Waste can be found in the form of errors and practices such as testing for medically unlikely scenarios or unintentional duplicate billing.
More formally, fraud in healthcare claims is defined as outright illegal acts done intentionally to trick the system for monetary gain, such schemes like pass-through billing. 18 U.S. Code 1347 defines healthcare fraud as “Whoever knowingly and willfully executes, or attempts to execute, a scheme or artifice— (1) to defraud any health care benefit program.” 1
1. Cornell Law School Legal Information Instittue https://www.law.cornell.edu/uscode/text/18/1347
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Q. HOW DO I KNOW WHEN THERE IS FRAUD, WASTE OR ABUSE WITHIN MY EMPLOYEE HEALTHCARE CLAIMS?
A. Employers can find it difficult, if not impossible, to find fraud, waste or abuse just by reviewing employee healthcare claims. Not only does the opaque medical coding system make healthcare claims indecipherable to most outside of the healthcare community, but these abuses can also be extremely hard to identify even to those who work with claims regularly.
The best method for identifying fraud, waste and abuse is to use inferential analytics designed to look for claims that are outside of the norm and compare them to “normal” or proper claims. Once an abnormal claim is identified using analytics, it then needs a clinical eye trained to review the claims to make sure it is abusive rather than an extremely sick patient. SmartLight Analytics has the unique combination of inferential analytics designed specifically for this task along with a team of clinical and pharmaceutical experts who review these claims to find and investigate such claims. It is a process that almost all self-funded employers do not have the expertise to conduct.
Q. HAS THE COVID-19 PANDEMIC INCREASED THE LIKELYHOOD OF FRAUD IN MEDICAL CLAIMS?
A: Existing areas of vulnerability in our healthcare system could be ripe for additional fraud in a time when everyone in the healthcare system is in crisis mode, including the insurance carriers dealing with a massive influx in claims due to COVID-19.
With reduced restrictions/controls on accessibility to treatment during the pandemic, the ability to cover up fraud could be greater. Bad players – those already intentionally committing fraud within the system – see every tragedy as an opportunity. We have already seen evidence of such players long before the pandemic. Read more about fraud during COVID.
Q. WHAT RESPONSIBILITY DO I HAVE FOR FRAUD, WASTE OR ABUSE WITHIN MY EMPLOYEE HEALTHCARE CLAIMS?
A. Examining exactly where healthcare dollars are spent is not just a budget management or cost-saving practice for business, as plan sponsors are reminded often, it is also a fiduciary responsibility under the Employee Retirement Income Security Act (ERISA). The U.S. Department of Labor Employee Benefits Security Administration has oversight for the fiduciary duties applicable to employee welfare benefits plans. Under ERISA, employers are accountable for spending employee healthcare contributions as well as the employer’s contributions with the care, skill, and diligence of a prudent person.2 ERISA guidelines for prudent oversight of a health plan are relatively vague, but there are best practices that not only limit fiduciary liability, but also significantly reduce the unnecessary spend in the plan assets. Download our White Paper using the form on this page to read more about this.
2 U.S. Department of Labor. Understanding Your Fiduciary Responsibilities Under a Group Health Plan. September 2015. https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/publications/understanding-your-fiduciary-responsibilities-under-a-group-health-plan.pdf
Q. WHAT ARE THE MOST COMMON TYPES OF ABUSE FOUND IN HEALTHCARE CLAIMS?
A: Outright fraud accounts for the greatest percentage of abuse or waste in the employee healthcare claims reviewed by SmartLight Analytics. The most frequently found fraudulent schemes are pass-through billing, patient recruiting by rehab centers, billing for services not rendered and fraudulent lab testing. Medical services paid for but that are outside of an employer’s current Summary Plan Description often represents a large amount of waste in employee claims. For example, this would be a claim for cosmetic surgery which is processed by a payer but is a service not covered under the employer-funded healthcare insurance. ER abuse/overuse continues to be an area in which employers are wasting money within their healthcare spending. One particularly egregious example found within a SmartLight client’s claims was a single patient found with 47 ER visits in 23 months. Such claims unchecked can add up quickly. This example costs one employer more than $200,000 for one employee. Other common examples of abuse are treatments provided by doctors for medically unlikely scenarios, plain billing errors or duplications and pharmaceutical abuse.
Q. ISN’T MY INSURANCE PAYER TAKING CARE OF FINDING FRAUD, WASTE AND ABUSE IN MY EMPLOYEE HEALTHCARE CLAIMS?
A: Companies across the United States have self-funded employee healthcare plans administered by large insurance providers through Administrative Services Only (ASO) agreements. In these agreements, the insurance companies process claims for an employer for a fee without the financial risk involved in being the insurer. Much of the processing or adjudication of claims is done automatically without much human oversight claim by claim. As a result, claims containing fraud, waste, and abuse can be processed without anyone – the ASO or the employer – noticing. If the claim is technically correct, it is automatically processed and is paid. The ASO makes money by processing the claim. In this situation, however, there is no one making sure employers are not losing money from fraudulent schemes, from waste such as duplicate billing or from abuse like overuse of the ER and lab testing.
Self-funded employers are now finding that ASO providers are offering an additional service to go back through claims to audit them for fraud, waste, and abuse. However, this is a case highly fraught with conflict of interest.
Q. HOW FAR BACK DOES THE FIRST REVIEW OF CLAIMS GO?
We require at least 12 months of historical data to tune our models for the employer’s population. These historical claims are not reviewed for recoupment unless specifically requested by the employer.