Fraudsters Beware, Health Data Analysts Have Your Numbers

The public face of fraud-fighting might be law enforcement kicking down doors and serving warrants, but behind the scenes data analysts are crunching the numbers and blazing the trail using high-tech tools to find the bad guys hiding in the numbers.

A combination of headquarters-based data analysts and seasoned field investigators is fueling the anti-fraud efforts of private health insurance plans, industry stakeholders told Bloomberg BNA.

While there are no hard numbers on how much fraud there is in the private sector, plans must enlist analysts and investigators to track down any number of schemes, from non-existent providers submitting false claims to legitimate providers billing for services at higher levels than merited.

An example of the collaboration is evident at Horizon Blue Cross Blue Shield of New Jersey, where data analysts occasionally leave their desks and head out into the field to observe ongoing investigations, Horizon’s Douglas Falduto, told Bloomberg BNA. Falduto is Horizon’s president of administration and chief security officer.

Analyzing claims data on an almost real-time basis can help private insurance plans catch fraud on the front-end and prevent any money going out the door, Falduto said.

Beyond claims, Falduto said Horizon looks at several other pieces of data, including patient and provider enrollment data to observe if there are any geographic anomalies between the patient population and their providers.

“If we see wide disparities or clusters in the patient base, the information may inform other analytics we use,” Falduto said.

Horizon also conducts predictive analytics on its data to identify any aberrant behavior among providers, such as unusually high billing levels or heavy billing for a particular service.

As in most health insurance companies, Horizon’s special investigations unit is responsible for the insurer’s anti-fraud efforts and has 26 field investigators and seven data analysts, Falduto said.

In 2015, Horizon’s anti-fraud efforts saved the company $43 million, which included recovery of improper payments and averted losses, Falduto said. Since 2005, Horizon’s anti-fraud efforts have saved $290 million.

Anti-Fraud Efforts.

Falduto said Horizon’s anti-fraud efforts encompass three categories: education and awareness, analytics and field investigations.

“We built a dedicated analytics program almost 10 years ago,” Falduto said, noting that the insurer originally began with an outsourced data analytics model, but now creates its own data models.

“We’ve combined different analytical models, some proprietary and some commercial,” Falduto said.

Horizon’s special investigations unit has been operating for 30 years, during which time it has added more manpower and resources. The SIU combines field investigators and data analysts and collaborates extensively with state government and federal law enforcement.

In 2015, for example, Horizon referred 187 possible fraud cases to the New Jersey Insurance Fraud Prosecutor, the New Jersey Attorney General’s Office, the Federal Bureau of Investigation and other federal law enforcement agencies, Falduto said.

Law Enforcement.

Collaboration between private health plans and law enforcement is critical in deterring health-care fraud, as fraud schemes tend to cut across multiple plans and government programs, Christopher Iu, acting insurance fraud prosecutor in New Jersey’s Department of Law and Public Safety, told Bloomberg BNA July 22.

Iu said his office relies on referrals from private health plans to investigate and prosecute health-care fraud cases. “We’ve got good relationships with most of the carriers in New Jersey, and we work directly with their SIUs,” he said.

Starting this year, plans can submit referrals electronically, and Iu said those referrals have contributed to an uptick in work for his office, which consists of 17 attorneys and 40 field detectives.

Common Fraud Schemes.

While health-care fraud can take on many appearances, a few common schemes have become increasingly popular in New Jersey, Iu said, including those involving pain management clinics.

For example, in one scheme, fraudsters obtain publicly available car accident records to solicit injured individuals and steer them toward pain management clinics in return for kickbacks.

A similar scheme involves patients deliberately getting into car accidents, often fender benders, then going to pain management clinics, for which they are compensated by the clinic owners, Iu said.

Imaging fraud among private plans has also been growing, Iu said, with providers who offer services like CT scans paying kickbacks to physicians for referrals. Other imaging providers are “boosting” their services by billing private plans, for example, for unnecessarily imaging a leg instead of a foot, which can lead to bigger payment, Iu said.

“We’re just getting into prescription drug fraud,” Iu said, and the pharmaceutical industry is working with his office to identify billing patterns for opioids that could indicate fraud or abuse. While most of the opioid fraud is designed to facilitate drug addiction, it’s still actively defrauding health-insurance plans, Iu said.

Fraud Deterrent.

Most of the fraud schemes Iu’s office sees involve individuals without criminal records, which generally removes the threat of a prison sentence as a deterrent. However, Iu said individuals who are found guilty of health-care fraud can lose their medical license, and the threat of that loss can be a strong deterrent against fraud. Iu’s office works with the New Jersey Division of Consumer Affairs, which can terminate doctors’ licenses.

In general, Iu’s office looks at fraud schemes with dollar amounts over $50,000. Anything below that level is taken up at the county level.

Phantom Provider.

Across the country, insurance plans are seeing new billing fraud schemes all the time.

For example, Falduto said Horizon has been seeing more phantom provider fraud schemes, which are usually found in Florida, Texas and California. The scheme involves someone impersonating a provider and accessing a beneficiary’s information through a variety of means, including at times with help from the beneficiary. They then bill the insurance plan for non-rendered services.

Falduto said fraudsters like to test the waters with a few small dollar claims, and once they’ve gone through, “they blitz a ton of claims, collect the money and close up shop.”

Thanks to predictive data analytics, Horizon is catching on to this sort of scheme before claims are being paid, Falduto said.

Another fraud scheme that’s growing is the impossible day scenario, which involves a provider billing for more services in a workday than is possible. Again, Falduto said data analytics is capable of flagging unusual jumps in claims activity and halting payments.

Providers have also been known to engage in upcoding, meaning they’ve billed Horizon for a higher-level of service than actually performed, as well as billing for fraudulent diagnoses, Falduto said.

Fraud schemes can also stem from consumers, such as when a Horizon member files a false claim or uses a false identification number. Beneficiaries have also falsely represented dependents as being eligible for coverage when they are not, Falduto said.

Nationwide Fraud.

On a national level, health-care fraud has grown more sophisticated, moving away from lone actors toward fraud schemes involving multiple parties, Louis Saccoccio, chief executive officer of the National Health Care Anti-Fraud Association, told Bloomberg BNA

Pharmaceutical fraud is increasing, Saccoccio said, especially schemes associated with opioids. Some of the pharma fraud involves drug diversion schemes, where the purpose is to illegally obtain opioids and either re-sell them or abuse them.

Saccoccio identified several additional industry segments where fraud has been growing more prevalent, including:

• compounded drugs;
• lab testing, especially urine drug screening;
• sober homes designed for drug treatment;
• pain management;
• psychotherapy;
• electronic health records, which he said are still prone to cutting and pasting of false information; and
• beneficiary identity theft.

Information Sharing Among Plans.

Across the U.S., all private plans are using data analytics, and some are performing link analysis, which involves building relationships between various people and then running the relationships through predictive analytics models to detect potential fraud, Saccoccio said.

Plans are also actively sharing fraud data analytics and the results of fraud investigations with each other, Saccoccio said.

The entire health insurance industry is dealing with similar fraud schemes and sharing data on schemes can help promote best practices for deterring fraudsters as well as alert plans of new fraud schemes, he told Bloomberg BNA.

The NHCAA holds case discussion meetings and conference calls with members where they’re able to discuss fraud cases with each other, Saccoccio said.

The NHCAA is a private-public partnership made up of roughly 90 private health insurers and nearly 120 federal, state and local government law enforcement and regulatory agencies that have jurisdiction over health-care fraud.

When it comes to fraud, there’s no reluctance to share information with competitors, Saccoccio said.

Government Collaboration.

While it is important for private health plans to collaborate and share information amongst themselves, it is just as important for plans to collaborate with law enforcement and federal and state governments, Falduto said.

“Our special investigative unit has been around for 30 years, and we’ve enjoyed a great collaborative relationship with law enforcement,” Falduto said.

Falduto said Horizon holds a lot of educational seminars that bring in state and federal partners, and said state and federal governments are spending the time and money on upgrading their data analytics.

“We’re ahead when it comes to analytics, but the gap is closing,” Falduto said.

Horizon is also a member of the Healthcare Fraud Prevention Partnership (HFPP), an initiative launched in July 2012 that promotes best practices and data sharing between public and private sectors on preventing health-care fraud.

Falduto said data sharing with the federal government has gotten better, but said there’s still some hesitancy to give away data. The hesitancy to share stems from fears of a data breach, Falduto said, even if the information is being delivered directly to the federal government.

The NHCAA is also a member of the HFPP, which Saccoccio said is still very active.

The HFPP is designed to analyze private and Medicare claims data, Saccoccio said, and is limited to performing specific data studies, such as reviewing high-risk pharmacies.

As for additional government collaboration, Saccoccio said the Federal Bureau of Investigation, TRICARE and the HHS Office of Inspector General all hold seats on the NHCAA board and are active participants in the NHCAA’s case discussion roundtables.

The NHCAA also operates the Special Investigation Resource and Intelligence System (SIRIS), where members can enter fraud case information. The SIRIS database provides a central hub to collect fraud information and share it with NHCAA members, Saccoccio said.

“All law enforcement has access to SIRIS,” Saccoccio said, including state and local law enforcement and the Department of Justice, as do NHCAA members.

Once a month, the NHCAA also provides an update of SIRIS information to members, Saccoccio said.

In 2015, NHCAA members conducted roughly 68,000 searches on the SIRIS database and entered approximately 1,100 new records and information on 22 new fraud schemes.