Briefing Document: Insurance Fraud, Waste, and Abuse Strategies in Global Healthcare and Travel Insurance

In this briefing document we summarise the key themes and insights discussed by various executives from the international private medical insurance (iPMI) and travel insurance sectors regarding fraud, waste, and abuse (FWA). The round table, hosted by iPMI Global, focused on the challenges, current landscape, prevention strategies, the role of technology and human resources, the impact of COVID-19, and the overall importance of having a robust FWA prevention plan. The "iceberg risk concept" is introduced as a metaphor to highlight the hidden and complex nature of FWA.

Main Themes and Important Ideas/Facts:

1. The Significance and Impact of Fraud, Waste, and Abuse:

• Financial Losses: Healthcare fraud causes tens of billions of dollars in losses globally each year (FBI cited). Global Excel mentions that healthcare fraud costs the USA between $68B and $230B annually. These losses can lead to higher insurance premiums and increased taxes.
• Patient Harm: FWA can expose patients to unnecessary medical procedures (FBI cited).
• Rising Medical Costs: Medical fraud is a significant driver of rising medical costs for insurance companies.
• Prevalence: FWA is a "big problem" in the industry and "deeply embedded" in the system, especially in the United States.
• Beyond Fraud: The discussion emphasizes that FWA encompasses not only intentional fraud but also waste (overutilization, inefficiencies) and abuse (practices inconsistent with sound fiscal, business, or medical practices that result in unnecessary costs). New Frontier Group provides clear definitions for each.
• Fraud: "intentional deception or misrepresentation made by a person or organization." Examples include submitting claims for services not provided and falsifying records.
• Waste: "overutilization of services or other errors and inefficiencies that result in un-necessary costs." Examples include excessive testing and using brand drugs when generics are available.
• Abuse: Practices leading to unnecessary costs or reimbursement for medically unnecessary services, potentially without criminal intent. Examples include billing for unnecessary services and upcoding.

2. Different Forms of Fraud and Abuse:

• Insurance Claims Fraud: False or exaggerated claims submitted by insured individuals, sometimes in collusion with service providers.
• Provider Fraud: Medical facilities colluding with patients to create fictitious or exaggerated claims, overcharging insurers, or premium diversion.
• Payer Fraud: Travel insurers issuing letters of guarantee they fail to honour.
• Other Types: Identity theft, phantom policies, organized insurance fraud rings, medical billing fraud. Fraud committed by providers, members/patients, employees, insurers/health plans, medical device manufacturers, pharmacies, and PBMs. Examples include performing unnecessary services, misrepresenting the setting or dates of service, falsifying records, and inappropriate prescribing.
• Pricing Disparities: In the U.S., the significant difference in pricing between self-pay patients and insurers is highlighted as a practice bordering on abusive.

3. Strategies for Preventing Fraud:

• Multi-faceted Approach: Prevention requires a combination of strategies.
• AI-Driven Claims Screening: Essential for identifying standard fraud patterns and anomalies in high volumes of claims.
• Manual Scrutiny: Experienced personnel are needed for unique or complex cases.
• Pre-Contract Vetting: Stringent processes to mitigate provider fraud.
• Intelligence Sharing: Vital for detection and prevention.
• Regularly Updating Strategies: Redefining fraud risk indicators, assessing trends, and revising controls.
• Training Front-Line Staff: To keep fraud at the forefront of their minds and enable effective referrals.
• Celebrating Successes and Publicizing Trends: To raise awareness.
• Education and Awareness Programs: For policyholders and claim adjustors.
• Robust Underwriting and Pre-Risk Assessments: To identify potential red flags.
• Suspicious Claims Investigations: Utilizing Key Information Indicators (KIIs).
• Anti-Fraud Technology: Implementation of various technological tools.
• Collaboration: Between insurance companies, regulatory bodies, and law enforcement.
• Robust Customer Verification Processes: To ensure legitimacy.
• Policy Design and Wording: Important factors influencing fraud and abuse prevention.
• Internal Controls and Audits: To bring fraudulent activities to light.
• Collaboration with Certification Bodies and Law Enforcement: To stay informed about fraudulent providers.
• Advanced Tools: InterQual, Milliman, and Guidelines, enhanced by AI, are essential for establishing indisputable criteria to identify issues like over-utilization and coding errors.

4. The Role of Technology in Fraud Prevention:

• Pivotal Role: Technology, especially AI, is crucial for bolstering fraud prevention efforts.
• AI for Pattern Recognition: Effective for processing large volumes of claims and identifying common fraud patterns and anomalies.
• Machine Learning (ML): Algorithms can adapt over time to detect new fraud patterns.
• Bill Editing Platforms: To identify coding errors.
• Risk Scoring Platforms: To assign a risk score to each bill based on various factors.
• Specialized AI-Based Tools: For detailed analysis to identify potential fraud or abuse.
• Automated Fraud Detection Software and Trend Reporting: Integral to prevention (Charles Taylor Assistance).
• Data Analytics and Predictive Modelling: To identify patterns and assess the likelihood of fraudulent claims.
• Biometrics and Geospatial Analysis: For identity verification and anomaly detection.
• Blockchain Technology: For enhanced transparency and security.

5. The Complementary Role of Human Resources (HR):

• Essential Component: HR plays a crucial role in complex fraud detection and prevention.
• Hiring and Screening: Conducting background checks and verifying qualifications to reduce the risk of internal fraud

Scott Rosen, CEO at MDabroad comments, "This begins with meticulous hiring and screening processes, incorporating thorough background checks and skill assessments to build a team that’s not just competent but also inherently trustworthy and vigilant."

• Ethical Training and Awareness: Developing and implementing programs to promote ethical conduct.
• Whistleblower Programs: Providing channels for confidential reporting of suspected fraud.
• Culture Building: Promoting transparency, accountability, and ethics within the organization.
• Exit Interviews: Gathering feedback to identify potential issues.
• Focus on Judgment and Empathy: While technology handles repetitive tasks and big data analysis.

6. Impact of COVID-19 on the Fraud and Abuse Landscape:

• Initial Decrease in Claims: Due to travel restrictions.
• Consistent Proportion of Fraud: Even with fewer claims, the rate of fraud remained similar.
• Increase in Travel Cancellation Claims: Related to pandemic disruptions.
• Challenges to Investigations: Lockdowns and changing regulations complicated international investigations.
• Supplier-Inflated Costs: Difficulty in differentiating between inflated and fraudulent costs in extended accommodation claims.
• Economic Uncertainty: Created conditions for increased susceptibility to fraudulent schemes.
• Surge in Phishing and Cybercrime: Exploiting pandemic-related fears.
• Supply Chain and Procurement Fraud: Opportunities arising from disruptions.
• Insurance Fraud: False disability, business interruption, and travel claims.
• Remote Work Vulnerabilities: Increased risk due to less secure networks.
• Reduced Scrutiny by Regulatory Authorities: Creating opportunities for medical fraud.
• Exploitation of Chaos and Uncertainty: More instances of people taking advantage of the system.
• Problematic Pharmaceutical Practices: Over-prescription and erosion of consumer trust, leading to unnecessary spending.

7. Importance of an FWA Prevention Plan:

• Essential for Financial Protection: Mitigating losses and protecting assets.
• Brand Protection: Preventing fraudulent claims and protecting the insurer's reputation.
• Regulatory Compliance: Helping organizations adhere to regulations and avoid penalties.
• Maintaining Public Trust: Demonstrating a commitment to ethical practices.
• Cost Savings: Eliminating unnecessary expenses and improving the bottom line.
• Maintaining Quality of Patient Care: Ensuring resources are used appropriately in the healthcare sector.
• Strategic Risk Management: Protecting the organization's long-term viability.
• Continuous Review and Development: Plans must evolve to meet changing fraud trends.
• Commitment of People and Efficient Systems: Crucial for the plan's effectiveness.
• Ensuring Ongoing Compliance: With standards like Usual, Customary, and Reasonable (UCR).

Recent Cases of Fraud and Abuse:

The round table participants shared various recent cases, including:

• A member submitting claims for treatment at a clinic that had ceased operations.
• A doctor stealing patient details to set up false insurance policies and making suspicious claims.
• Sophisticated travel cancellation scams using false names and documents.
• A medical billing fraud scheme involving a hospital in the Dominican Republic and individuals with U.S. residency submitting fraudulent treatment claims.
• A complex case involving overcharging and unnecessary medical devices and procedures for a patient in a Washington State hospital.
• A case where a house call doctor in a hotel excessively overcharged and essentially held a patient "hostage" until payment.
• An attempted egregious overcharge for a follow-up orthopaedic foot surgery outside the U.S.

Conclusion:

iPMI Global analyst Christopher Knight concludes, “The round table discussion underscores the persistent and evolving threat of fraud, waste, and abuse in the global healthcare and travel insurance sectors. Participants emphasized the need for a proactive, multi-faceted approach to prevention that combines robust technological tools, the critical insights of human expertise, and a strong ethical culture fostered by HR. The impact of COVID-19 has further highlighted vulnerabilities and shifted fraud trends, necessitating continuous adaptation of prevention strategies. Ultimately, a comprehensive and actively maintained FWA prevention plan is deemed essential for financial security, brand reputation, regulatory compliance, and the long-term sustainability of the insurance industry.”

Related Reading: Insurance Fraud, Waste and Abuse Strategies Round Table