An overview of fraud, waste, and abuse
Employers with self-funded employee healthcare plans often see the rising cost of healthcare as the price of doing business. Many have taken steps to reduce cost by attempting to alter member behavior creating health and wellness centers and incentives for employees. But what most companies are leaving on the table is the money lost to fraud, waste, and abuse hidden in their healthcare claims data that no amount of member behavior change can reduce. Often employers are not even aware this waste is hidden in their healthcare plan claims. If identified and eliminated, these dollars could make a significant impact on reducing plan spending.
Analysis of healthcare claims from a sampling across multiple employers with self-funded healthcare plans and a combined total of more than 100,000 members, identified over $25 million in fraud, waste, and abuse by providers. The assessments found claim errors, pharmacy fraud and member issues, however, across every employer’s data, provider fraud accounted for the highest amount of wasted dollar. From the data emerged repeating provider schemes identified across employer industries and company locations.
Schemes such as pass-through billing, which have become more well-known, were still being found in employer member claims as late as Spring 2021. Uniquely developed statistical models using inferential analytics were employed to find hidden outliers in healthcare claims that were previously unnoticed by claims administrators. These statistical outliers were then rigorously vetted and determined to be clinical outliers.
Provider-driven abusive billing schemes account for an average of 60-70% of the wasteful spend found in healthcare claim payments, based on SmartLight Analytics’ empirical data. To be clear, the vast majority of providers are not bad actors trying to take advantage of the healthcare system or commit fraud. But those few who are, can cause significant financial damage. Luxury rehab center abuse initially identified in health claims data over 5 years ago is still seen in current billing, while pass through hospital billing, COVID-19 testing abuse and various other unethical billing patterns continue to be found in claims data. Most companies are not equipped to find and eliminate such schemes, so they continue to unknowingly waste healthcare dollars. Knowledge garnered from detailed analysis of claims data becomes a powerful tool that leads to better decisions and ultimately saves money.
“The National Health Care Anti-Fraud Association (NHCAA) estimates that the financial losses due to health care fraud are in the tens of billions of dollars each year. A conservative estimate is 3% of total health care expenditures, while some government and law enforcement agencies place the loss as high as 10% of our annual health outlay, which could mean more than $300 billion. Whether you have employer-sponsored health insurance or purchase your own insurance policy through HealthCare.gov, a state marketplace or the individual market, health care fraud inevitably translates into higher premiums and out-of-pocket expenses for consumers, as well as reduced benefits or coverage.”[1]
What is healthcare provider fraud? It is intentionally fraudulent or wasteful practices conducted by healthcare providers including physicians, rehab centers or labs. Examples include add-on lab tests, pass-through billing, predatory marketing practices or billing for services not rendered. It can be found in every set of group member healthcare claims data.
CATEGORIES OF FRAUD FINDINGS
Common Schemes Persist
Consistently, provider fraud was found to be the largest percentage of wasteful findings within employer healthcare plan claims. Three of the most significant provider schemes that continue to cost employers are:
- Substance abuse, rehabilitation center abuse and fraud
- Pass-through billing
- Testing abuse (most recently found in COVID testing)
Substance abuse, rehabilitation center abuse and fraud
In the last several years, the regions of Southern California and Florida have earned the nickname of ‘Rehab Riviera’ due to the high volume of substance abuse treatment centers opening there. Many of these centers face accusations of predatory marketing practices, patient recruiting violations and insurance fraud. SmartLight Analytics analysts who reviewed claims from suspect rehabilitation facilities consistently found centers recruiting members with specific mental health benefits and incentivizing them to enroll in their program by offering travel reimbursement, waiver of co-insurance amounts and, in some instances, payment while at the facility. Data analysis also confirmed members completing one program are immediately admitted to another center for the exact same services. Smartlight identified multiple members who were admitted to over 10 facilities consecutively, leaving one and being admitted to the next within days. As the provider is oftentimes billing an out-of-network rate the self-funded employer is left with a substantial bill. Two company healthcare plans particularly hard hit by these schemes were exposed to $3.3 million in substance abuse rehab fraud annually, according to analysis.
It should be said that in the rehab center abuse, members may receive treatment, however, accommodations are excessive, and costs are substantially higher with higher frequency billing when compared to similar in-network options much closer to the member’s home. Analysis found one member traveled more than 1,800 miles to be admitted to a rehab facility. According to the Orange County Register, which published a four-part series on the issue of luxury rehabs in the state of California (there are 1,864 rehab facilities in that state alone), “It doesn’t mean all rehabs are bad. But because of the lack of regulation, there’s a huge potential for fraud.”2
Pass-through Billing
Insurance companies reimburse rural critical access hospitals at higher rates than hospitals in urban areas to help maintain availability of healthcare in those communities. The higher rates have made these hospitals attractive targets for schemes that generated nearly half a billion dollars in alleged fraudulent billing.
This scheme, called pass-through billing, which involves in-network rural hospitals, has made large employers unintended subsidy providers for rural hospitals across the U.S. How? Agreements between physicians, out-of-network labs and hospitals are established enabling physicians to refer lab tests to an outside lab who in turn requests these facilities to submit the bill to the insurance carriers. The hospitals typically do not perform the lab tests, only bill payers as an in-network provider.
The hospitals or health systems then split the revenue with the physicians. This type of “kickback” financial arrangement incentivizing the provider to offer tests for financial gain are illegal in the healthcare industry. The Anti-Kickback Statute prohibits these types of referral arrangements. Even though these schemes have become more well-known and are clearly illegal, they continue to show up in claims even as late as December 2020. SmartLight identified more than seven hospitals in Texas and neighboring states involved in this abusive billing scheme in 2019 and continue to find evidence of this scheme in employer claims throughout 2020. Analysis of claims data using inferential methods can identify these suspect claims in an employer’s healthcare claims population. Significant aberrancies involving high-dollar billing from rural hospitals, often hundreds to thousands of miles away from a provider are one of the flags that indicate potential pass-through billing. There is also reoccurrence of billing from the same providers found across different employers’ data which can be identified.
Testing Abuse
With the strong demand for COVID-19 testing, limited supplies, and the decision by CMS to relax rules for certain test orders, the likelihood of fraudulent and/or abusive billing during the pandemic is high. Although the COVID-19 testing is not particularly lucrative, the primary risk for fraud is in the addition of unnecessary testing. 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. COVID-19 testing and other associated laboratory testing no longer require an order from the treating physician during the COVID-19 public health emergency. According to the SmartLight Analytics analysis, relaxation of the physician ordering rules allows unscrupulous actors more leeway for fraudulent billing of unnecessary add-on testing. Instead of charging $100 or $150 for the test, suspect labs bill in excess of $500 for the additional testing.
Even before COVID-19, testing abuse was a widespread issue. Analysis of billing data from Medicare and private insurance billing nationwide found that spending on urine screens and related genetic tests quadrupled from 2011 to 2014 to an estimated $8.5 billion a year. Yet there are virtually no national standards regarding who gets tested, for which drugs and how often. Both commercial and government payers have spent hundreds of millions of dollars on tests to detect drugs that presented minimal abuse danger for most patients, according to arguments made in court cases that challenge the standing orders to test patients for drugs.
A Fierce Healthcare report outlined these schemes: “The two labs—Southwest Laboratories in Dallas and ESA Toxicology in Houston—submitted at least 28,000 fraudulent claims between 2014 and 2017, according to Aetna. In some cases, the charges were ‘egregious and inflated,’ the insurer added, pointing to one instance in which ESA charged more than $10,000 for a urine drug test that a national lab charged just $114.” 3
CONCLUSION:
The process of minimizing FWA does not end with the discovery. After an inferential analysis, experts are needed to review scenarios from a clinical perspective. Nurses, physicians, certified medical coders among other experts look at claims data to provide a more complete picture of statistics by delving deep into the case details. Without this insight, analysis can be too quick to label individual cases as fraud, waste, or abuse. Finally, once claims are identified as potentially fraud, claims administrators then become a part of the team working to remediate the claims and prevent them from happening again in the future.
Employers who have, in the past, felt powerless to tackle the issue of rising healthcare cost are armed with power, knowledge, and transparency with regular claim reviews and analysis performed by a dedicated team of specialists looking for fraud, waste, and abuse. Capturing these outlier claims, and uncovering such abuse allows employers to save significant dollars and, in some cases, avoid more cost shifting to employees for healthcare benefits.
“If you don’t think your plan is being hit by fraud, waste, and abuse, you are kidding yourself,” one benefits leader said. “It’s a systematic problem.”
The problem won’t go away on its own, even as more emphasis is put on pricing transparency thanks to recent legislation. Without substantial expertise in analyzing and understanding these issues, the U.S. healthcare system with its inherent complexities often conceals these schemes from view. And as new regulations roll out, new schemes will be devised to abuse the system. Identifying these issues within an employer’s self-funded healthcare plan is also not a one-shot fix. It is a process that requires continual monitoring and adaptive analytic models. As long as there are new claims and healthcare remains a largely opaque, for-profit system, fraud, waste, and abuse will continue both on purpose and simply by human error.
How Can Employers Avoid Paying for Provider Fraud?
Accountability is achieved through continuous monitoring that begins with establishing a relationship with claims administrators paying claims and bringing in an independent party to review claims to avoid conflict of interest. Initial assessments typically involve an historical review (12-24 months) of employee healthcare data to get a picture of the potential waste in the claims. The claims are identified and presented to the employer and carrier as actionable findings, meaning there is potential to remediate costs and recover wasted dollars.
The initial assessment is just the first step, however. Ongoing data monitoring is needed to continue to analyze 100% of an employer’s claims to ensure that identified claims are not repeated and fraud is stopped as well as to capture any new fraud, waste, or abuse.
Sources
- “The Challenge of Health Care Fraud” National Healthcare Anti-Fraud Association. https://www.nhcaa.org/resources/health-care-anti-fraud-resources/the-challenge-of-health-care-fraud.aspx
- Sforza, Teri, et al. “How Some Southern California Drug Rehab Centers Exploit Addition.” The Orange County Register. May 21, 2017. www.ocregister.com/2017/05/21/how-some-southern-california-drug-rehab-centers-exploit-addiction/.
- Sweeney, Evan. “Aetna Sues 2 Texas Labs Over $50M Fraud Scheme.” Fierce Healthcare May 22, 2018. https://www.fiercehealthcare.com/payer/aetna-southwest-labs-esa-toxicology-fraud-overbilling
Additional sources:
“Common Healthcare Fraud Schemes” Virginia State Government Attorney General Mark R. Herring. https://www.oag.state.va.us/programs-initiatives/triad-seniors/14-initiatives/511-common-healthcare-fraud-schemes
