worried man in pajamas

We have all heard the scams associated with Medicare and Medicaid beneficiaries being targeted for delivery of wheelchairs and other medical supplies that patients don’t need and their doctors didn’t order.  We have heard of the horror stories of former drug traffickers that now find it safer and more lucrative to engage in prescription fraud.  (It’s easier to drive people to and from the pharmacies and pay kickbacks to physicians and patients for moving prescription revenue through store fronts than it is to run an illegal drug cartel.)  We have heard about FBI takedowns of thieves targeting Medicare across state lines with ties back to organized crime rings in Armenia.  We’ve even heard the ugly stories of people using ambulances as taxi services, but billing them to insurance companies for $800 per ride.  Those are just a few of the scams that have made headlines for years.

In 2014, we can expect some new problem areas to come front and center, and it’s important that health payers don’t get caught looking the other way.  Here are five areas worthy of mention with the new health care marketplace landscape.

The Enhanced Use of Electronic Medical Records (EMRs) – Panacea or Pandora’s Box?

In a perfect world, electronic medical records will reduce paperwork, improve efficiency, reduce costs and reduce errors.  But the world we live in is far from perfect, as EMRs will also make it easier to falsify documentation.  Be suspicious of too many medical documents created on a Sunday or holiday.  Be suspicious of audit trails that are turned off in documentation systems.  Be suspicious of one practice with an inordinately high number of diabetic, overweight or hypertensive patients, all requiring extra reimbursement levels or longer hospitalizations because of those co-morbidities.

With the prevalence of EMRs, it’s now easier than ever to cut and paste the demographics (e.g., height, weight, sex) as well as the symptoms and diagnosis (e.g., shortness of breath, hypertension).  Records can be fabricated to support phony diagnoses without the old fashioned evidence that Wite Out or correction tape was used.  The audit trails in EMR systems can be your best friend.

ICD-10 Coding Changes as an Excuse for Improper Billing

In October of 2014, the U.S. will join the rest of the globe in adopting the ICD-10 coding conventions.  As a nation, the U.S. will be converting from 17,000 diagnosis categories to more than 150,000 disease classifications.  This will impact providers, billers, health plans, and anyone who analyzes U.S. health care claims data.  Unfortunately, all of those stakeholders are left to their own to re-map the codes.

If the rest of the world is any indicator, it is likely the U.S. will be analyzing data with a blend of ICD-9 and ICD-10 codes for years to come.  Many IT systems will be impacted, trend analysis and analytics will change and claims documentation in both paper and electronic form will be overhauled.  Moving to ICD-10 is intended to bring the benefits of greater coding accuracy, higher data quality for measuring service and outcomes, more efficiency, lower costs and better alignment worldwide.

Recognize that two sweeping changes are happening:  more codes with more specificity, but also totally restructured codes.  It should be noted that only a small percentage of codes will map directly, and all other codes will require someone to “infer” the level of specificity originally intended.  No generally approved complete translation mapping is available.  Therefore, we will see improper billings as an industry problem get worse before anyone can reap the benefits of the reasons we moved to ICD-10 in the first place.  Unscrupulous billers will find holes in the system and take full advantage of it.  Some office staff will attempt to see if higher reimbursement can be generated and say “oops, we don’t understand the new coding system” until that excuse runs out.  At the very least, some health care providers and some health plans will use ICD-10 adoption as an excuse to re-negotiate unfavorable contracting terms with the other party, to the other’s detriment.

New Marketplaces under the Patient Protection and Affordable Care Act (PPACA) – Phishing

As the marketplaces for new entrants to the health care system are opening for business (not only www.healthcare.gov, but the state-run exchanges as well), the one thing every American citizen seems to agree on is that there is mass confusion among the public at large.  This always sweetens the opportunity for would-be fraudsters to go phishing.  Medical identity theft has been a growing problem for years.  The consequences of having your medical benefits ID stolen are far reaching:

  • It can impact your ability to qualify for insurance later,
  • It can take years to unravel the errors and set the record straight,
  • It can impact your prescription interaction records, and cause the inappropriate medications to be dispensed later and
  • It can cause errors in medical interventions later (you were not thought to be allergic to penicillin but in fact you are, or your blood type is recorded wrong).

Additionally, there is a financial impact estimated by some experts to be many times the size of credit card fraud, when you include legal fees as well as co-pays and insurance red tape.  According to research by the Ponemon Institute, the average dollar impact for every instance of medical identity theft was over $20,000 in 2012 and 10 percent of cases reported an impact exceeding $100,000.

Be wary of the phone calls that occur before open enrollment ends.  Senior Medicare beneficiaries have been easy targets for years with fraudsters that call during the annual open enrollment period, pretending to be from a legitimate insurer, supposedly trying to verify eligibility for enrollment by asking for the person’s Medicare ID or Social Security number.  The same is now happening with the under-65 marketplaces during open enrollment.  Additionally, they are asking for income verification and place of employment, and a wealth of other information that could enable phishers to “impersonate” the insured.  A good rule of thumb: Consumers should never give that information out over the phone to someone calling and asking for it.  Always call the insurer back at an office number you know and trust (this can easily be obtained from the insurer’s website) before giving any such information over the phone.  Never give that information out to an inbound caller.

New Marketplaces under PPACA – Eligibility Fraud

Sadly, it is not only phishers that are the bad actors in this play.  Sometimes, potential enrollees are attempting to game the system by falsifying income levels and assets to qualify for premium subsidies to which they would not otherwise be entitled.  With health care costs somewhere between $6,000 and $17,000 per year (on average, depending on single versus family and a host of other factors), potential subsidies can be substantial.  Misrepresentation can either be done on the enrollee’s own, with false information provided through the online application, or in collusion with the enroller who is helping them complete the process.  And, at least in 2014, only a limited amount of income verification will be conducted by the government authorities and issuers of qualified health plans.

New Marketplaces under PPACA – Claims Fraud and “Seekers” of Services

During open enrollment, issuers of qualified health plans need to take all comers, regardless of pre-existing conditions.  The three R’s – reinsurance, risk corridors and risk adjustment – a methodology to protect the market from an unfavorable spread of risk, will apply for the first few years.  However, taking all comers does open the door to unscrupulous parties, in collusion with providers of health care, to “seek” services as a revenue generator.  The classic example is drug-seeking behavior.  Take out a policy in January and the high utilization of hydrocodone, Vicodin or whatever flavor of pain management cocktail starts in February.  Often times, the prescriber, the pharmacy and the insured are in collusion to generate a big business revenue stream where everyone can financially benefit; that is, except the health care payer and taxpayers.

Following the Money

In the world of improper payments, it has long been true that you need just “follow the money” to find the newest scam.  Starting in 2014, as a result of PPACA, the U.S. health care system has been injected with millions of new consumers of health care services, which means more health care revenue potential.  At the same time, a confluence of events has added confusion to the mix, as outlined above. Payers should brace themselves for a new onslaught with hybrid vigor.  Keep following the money.

Julie Malida

About the Author

Julie Malida is the Principal for Health Care Fraud Solutions in the Security Intelligence Practice at the SAS Institute Inc.  She is a 30 year veteran of the health insurance industry and is a Fellow of the Society of Actuaries and a Member of the American Academy of Actuaries.

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