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Solving Healthcare Fraud

Healthcare SymbolThe Wall Street Journal reported in Florida Doctor Linked to Sen. Robert Menendez Indicted for Medicare Fraud  this morning that a West Palm Beach opthamologist got $105 million from the Centers for Medicare & Medicaid Services (CMS) over a period of six years. Unfortunately, the reported case is one of many. As discussed in the new book Health Attitude: Unraveling and Solving the Complexities of Healthcare, the waste in the American healthcare system is more than $500 billion per year. Some believe it is more than $1 trillion.

A significant share of the waste is due to fraud. Healthcare fraud is rampant and has been very difficult to stop, but The Centers for Medicare & Medicaid Services are making some progress. In the Los Angeles area, one of the highest fraud locations, strike force offices have been established. The two-year-old program aims to, among other things, identify bad actors before they get paid. In 2013, The Centers developed leads for 469 new investigations through a new Fraud Prevention System. The program identified or prevented $211 million in fraudulent payments. This was nearly double the prior year, but the amount recovered is minuscule compared with the tens of billions lost.

The fraud program is a good start, but it has a long way to go. Fraud is easy to understand when you see the details of a specific case, but discovering the cases is complex. The perpetrators include a range of providers including physicians, pharmacies, nursing homes, home healthcare services, medical device manufacturers, and even Medicare beneficiaries themselves. The common fraud schemes used by the providers include: (1) billing for “phantom patients”, medical goods or services not provided, or more hours than there are in a day, (2) billing separately for procedures normally covered by a single fee, (3) charging more than once for the same service, (4) charging for a more complex service than was performed, (5) concealing ownership in a related company, and (6) using false credentials.

The solution to such a complex problem lies in big data and analytics. Big data consists of nearly 5 million claims that pour in every day. Big data is complex. Analytics is the process of discovering the details of big data and developing an understanding of meaningful patterns in the data. For example, a data scientist may discover in the Miami area there are 30% more prescriptions for electric wheelchairs than in any other metropolitan area. Digging deeper he or she might discover that 60% of those prescriptions come from one physician practice. Digging deeper still, it may turn out a physician owner of the practice is also an investor in a company making electric wheelchairs. In other fraud cases, providers have been found to submit numerous claims on a regular basis for multiple patients with exactly the same diagnoses and treatments. That appears to be the case in the story reported this morning.

Health Attitude dives deeper into the topic. I will be posting excerpts from Health Attitude from time to time here in the Attitude LLC blog. Please click here to receive an email version of the excerpts as they appear.

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