Cut Healthcare Costs Through Fraud Protection

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Cut Healthcare Costs Through Fraud Protection
George J. Bregante Founder TC3 Health, Inc
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Current Health Care Environment
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Current Health Care Environment

• 2011 2014 reform a new, unparalleled level of
  disruption Payers are called upon to
• Embrace new individual consumer markets
• Engage in new care delivery models
• Manage new payment schemes
• Implement new information codes and reporting
• Achieve mandated cost efficiency
• Demonstrate improved value and outcomes
• Market cost pressures
• National health expenditures (as of GDP) rose
  from 5.2 in 1960 to 16.2 in 2008 and will
  continue to rise over next 10-20 years (Centers
  for Medicare Medicaid Services)
• Regulatory Pressures. The medical loss ratio
  mandate has forced payers to lower admin costs.
• Electronic payments automation to the payers
  provider networks lowers costs and achieves the
  mandated ratios
• A secure, compliant, and reliable platform to
  deliver these healthcare and payment transactions
  is required.

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Current Health Care Environment

• Consumer emergence. 42 million people will
  purchase healthcare ins/services by 2016.
• As of January 2010, 10 million were enrolled in
  high deductible health plans, over doubling 2004
  enrollment level
• Responsibility for payments moves toward
  consumers
• Consumer market will demand more
• Provider cost pressures. Increased consumer
  responsibility equals increased consumer bad debt
  for providers.
• Consequently, providers will need integrated
  payment and financial tools to better track and
  manage payments and outcomes.
• Payer and Provider partnership. Achieving
  healthcare payments automation requires
  collaboration between healthcare payers and
  providers.
• While this relationship shifts to a partnership
  model, efficient and automated payment solutions
  will attract providers under cost pressures and
  improve financial reporting and management.

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The Attitudes About Fraud

• One of five U.S. adults about 45 million people
  say its acceptable to defraud insurance
  companies under certain circumstances. Four of
  five adults think insurance fraud is unethical.
  (Four Faces of Insurance Fraud, Coalition Against
  Insurance Fraud, 2008)
• Nearly one of four Americans says its ok to
  defraud insurers (8 percent say its quite
  acceptable to bilk insurers, and 16 percent say
  its somewhat acceptable.) (Accenture Ltd.,
  2003)
• About one in 10 people agree its ok to submit
  claims for items that arent lost or damaged, or
  for personal injuries that didnt occur.
  (Accenture Ltd., 2003)
• Two of five people are not very likely or not
  likely at all to report someone who defrauded an
  insurer. (Accenture Ltd., 2003)

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How Big is the Fraud Problem?
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FRAUD THE NUMBERS

• The U.S. spends more than 2 trillion on
  healthcare annually. At least 3 percent of that
  spending or 68 billion is lost to fraud each
  year. (National Health Care Anti-Fraud
  Association, 2008)
• Medicare and Medicaid lose an estimated 60
  billion or more annually to fraud, including 2.5
  billion in South Florida. (Miami Herald, August
  11, 2008)
• Medicare paid dead physicians 478,500 claims
  totaling up to 92 million from 2000 to 2007.
  These claims included 16,548 to 18,240 deceased
  physicians. (U.S. Senate Permanent Committee on
  Investigations, 2008)
• Thats on top of claim processing errors
• Medicare and Medicaid made an estimated 23.7
  billion in improper payments in 2007.  These
  included 10.8 billion for Medicare and 12.9
  billion for Medicaid.  Medicares fee-for-service
  reduced its error rate from 4.4 percent to 3.9
  percent. (U.S. Office of Management and Budget,
  2008)

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Healthcare Fraud in the U.S.
By The Numbers 19 - percentage of annual
healthcare waste attributed to fraud 10 -
percentage of national healthcare spend due to
fraud and abuse 50 - percentage increase to
OIGs fraud fighting budget 600 to 800B
amount of annual fraud, waste and abuse in US
healthcare system 226B - Amount of annual loss
due to healthcare fraud alone 8 to 12 - ROI for
every 1 invested in fighting healthcare fraud
Source Thomson Reuters, 2009 (Federal Bureau of
Investigation, Financial Crimes Report to the
Public, Fiscal Year 2007 National Health Care
Anti-Fraud Association, 2008) PWC Top 10
Healthcare Issues in 2010
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Why Healthcare Fraud Has Exploded
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Common Examples of Healthcare Fraud

• Healthcare fraud is an intentional
  misrepresentation of facts submitted to support a
  healthcare insurance claim that results in
  payment of a fraudulent claim or overpayment of
  medical coverage.
• Services billed but never performed
• Upcoding/Unbundling of services
• Double billing
• Overuse of an expensive unnecessary treatment
• Performing clinical services without a license
• Phantom provider billing medical identity theft
• Recruiting patients for unnecessary medical
  procedures
• Non-disclosed provider financial interests in
  facility
• Doctor shopping for multiple prescriptions
• Billing for different services than are actually
  performed or covered by the payer

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Types of Healthcare Fraud Abuse
Other
Services never provided
Pharmacy
False diagnosis
Upcoding
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Why Has Healthcare Fraud Exploded?

• The Willie Sutton Rule I rob banks because
  thats where the money is! In other wordsits
  easy
• Payment models encourage maximum usage, not
  efficient outcomes
• Pay and chase dominates the healthcare system
• Prevention is minimal and detection is highly
  resource intensive
• Limited use of sophisticated technology
• Huge upside mild penalties (jail time and
  fines) vs. other crimes
• No sharing of information
• RESULT Department of Justice from 1991-2009
  recovered 23.2 billion
• Less than 0.1 of all program expenditures
• The bad guys are outgunning the good guys

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Prepayment vs. Pay Chase
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Prepayment Fraud Detection and Investigations
Its much easier to close the barn door before
the cow gets out. This analogy applies
to prepayment investigations. Its much easier
and more effective to stop a questionable claim
from getting paid than it is to pay and chase.

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The Value of Prepayment Fraud Detection

• 100 savings on fraud identified and avoided
• Real-time savings no need to finance the
  fraudsters and abusive billers
• Deterrent effect providers change their
  behavior
• Fewer legal issues shift burden of proof to
  bad guys
• Focus resources on most suspect, highest ROI
  claims
• No recovery effort or resources needed
• Less expensive than post-pay research and audits
  
• Key to preservation of plan assets

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How a Successful Fraud Prevention Program Works
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Comprehensive Anti-Fraud Program Components

• Detection
• Watch Lists
• Analytics
• Diagnostics Rules-Based Technology (RBT)
• Code Edit Compliance and Duplicate Detection
• Investigation
• Prepayment
• Post-payment
• Education
• Members
• Providers
• Employer Groups
• Employees

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Detection

• The best systems combine rules, statistical
  analyses, and predictive modeling.
• Watch lists
• Analytics/Statistical modeling
• Rules-based Technology

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Detection

• Watch Lists
• Providers
• Members, codes
• Proprietary networking, associations, previous
  investigations
• Public sanctions, licensing, OFAC
• Commercial high risk addresses
• Matching against provider demographics to
  identify suspect claims (pre- or post-pay)

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Detection

• Analytics
• - Many software programs are on the market that
  have been designed to
• identify billing inconsistencies
• target specific areas of high cost
• indicate patterns of unusual activity
• create and data mine an infinite number of issues
• provide proactive detection
• emulate manual analysis procedures that are
  followed by investigative staff

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Detection

• Rules-based Technology (RBT)
• Taking known schemes or ideas and translating
  those into rules
• Rules identify claims with selected
  characteristics
• Aids in identifying new providers/members engaged
  in known schemes
• If-then type rules
• Think creatively How would I game the system if
  I could

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Integrated Payment Integrity
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Fraud Abuse Prevention Suite
Provider Integrity Program Saves 1-2 of total
claims costs by detecting fraud, waste and abuse
before claims are paid. TruClaimSM Clinical
code editing engine and duplicate detector save
up to 4 of total claims costs beyond savings
identified internally
3-6 Savings
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Out-of-Network Repricing Optimizer
3-6 Savings
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Data Analytics Retro Recovery
3-6 Savings
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Appeals
A conservative approach results in very low
appeal rates rationale
Of the 1 of claims that are appealed, only 20
are overturned. This means 99.8 of claims are
paid or denied appropriately
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99
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Integrated Loss Control Results
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Integrated Loss Control Results
The average savings are 3-6. This means if your
average annual paid claims volume is 30,000,000,
your saving (900,000 to 1,800,000) will pay for
raises and other expenses as well as
Source Indeed.com Salary Search
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The Four Pillars of the Partnership
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The Four Pillars of the Partnership
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Achieving Cost Containment Through Cooperation
and Supported of CPEECHCC CHCC
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Summary

• A successful anti-fraud program is made up of
  several components
• Detection which could include a provider watch
  list program, rules-based technology, analytics,
  and manual referrals (via hotline or other
  source)
• Investigations Pre-payment claim
  investigations, post-payment investigations and
  recovery, or both
• Education and Training employees, participants,
  providers
• Integration - with other payment integrity
  programs has a significant cost reduction impact

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Questions
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George J. Bregantewww.tc3health.comgbregante_at_tc3
health.com714-343-1019Robert
Duncanrd_at_pacmedi.com949-335-3000 Ext 100