Copyright held by The John Cooke Fraud Report. Reprint rights are granted with attribution to The John Cooke Fraud Report with a link to this website.
By Leslie Kim
Health care fraud is not new. Companies have recognized its existence for many years. Until the late 70’s the primary way of dealing with the problem was by hiding from it if it wasn’t too blatant.
Alternatively, a company might shake its corporate finger at the perpetrator, chastise them in writing and demand the monies be returned. The respondent would then say, “Let’s have our attorneys work this problem out.” Next would come a deluge of attorney bills and a compromise that would allow for repayment of thirty to fifty cents on the dollar.
John Burry, Jr., currently CEO and Chairman of the Board of the Ohio Blues, took a hard look at this practice in the late 70’s when he served with the Michigan Blues. What he saw was that the health care industry, in essence, was offering interest-free loans by sending money to dishonest providers. On those loans that the provider was caught not paying back (when the company demanded the monies be returned), an attractive discounted payback was agreed upon. The bottom line amounted to the fact that there was no risk to stealing from the Blues under these circumstances. The contrary was true; there were only incentives!
The costly situation demanded a solution, so Burry came up with one. He decided to turn it around by putting a lot of risk into stealing from the Blues.
The first step in his plan was to put together a dedicated anti-fraud investigative unit within the Michigan Blue Cross plan. He staffed this unit with professional law enforcement personnel who had lengthy careers and heavy experience in investigating white collar and economic crimes. Their mission was to investigate and cause the prosecution of anyone or anything that was alleged as defrauding the Michigan Blues.
Burry charged his investigators with three objectives. The first was to prosecute or cause the prosecution of anyone stealing from BCBS. The next was to increase media attention and public awareness – let the people behind the frauds know that there was a sure risk in attempting to steal from the Blues. And finally, to implement systems integrity – translated to locating the weaknesses in the processing system and closing the windows of vulnerability.
There were positive results almost immediately. Burry was definitely on the right track from the very beginning and it was not long before Blues across the USA began to implement similar plans of attack that remain intact to this day. Ohio Blue Cross, hot on the heels of Michigan in setting up a fraud unit, actively pursues both health care fraud and health care abuse. “Corporate executives don’t always understand how they can deal with fraud. They are skeptical because of liability and bad faith,” says Doug Fowler, Director of Financial Investigation for Blue Cross Blue Shield of Ohio. “When you are the target of a fraud, you have the right and the responsibility to protect policyholder dollars and the corporation. You cannot do this by ignoring the problem, running from it or putting your head in the sand. You’ve got to grab it by the throat and do something about it. If you use the wrong personnel to do it, your risk level is high. But use the right staffing, the right approach and the right controls and it’s very effective. The Ohio Blue Cross Blue Shield’s fraud
unit has been sued once in 11 years and we won all the way to the State Supreme Court.”
The most productive source of Ohio tips is from a fraud hotline that is manned by people, not answering machines. Most of those calling this number fit into one of two categories: 1) subscribers who notice inconsistencies on billings and respond to the fraud flyer that has been included in their Explanation of Benefits (EOB) envelope or 2) provider employees who are reporting on co-workers. The latter category includes doctors noticing wrong-doings in clinics that have hired them. The straight doctor will extricate himself from the situation and then report it via hotline.
“We primarily look at providers. They do a vast amount of damage,” says Fowler. “Investigations of medical professionals consume 70 to 80 percent of our person hours because of their sophistication and complexity, but we also investigate instances and allegations of subscriber fraud and employee fraud just as vigorously.”
Ohio’s fraud hotline rings more than 900 times per month with a steady progression of calls from concerned people who realize that every dollar lost to fraud goes right to the bottom line.
The Florida Blues also favor the fraud hotline approach. There are two toll free 800 numbers, one ringing in the Special Investigation Unit and one ringing in the Medicare Fraud Unit. There are no monetary rewards. Callers receive only the satisfaction derived from their own integrity and honesty. The phone numbers appear on the bottom of every EOB along with a boldface message urging policyholders to report any improprieties.
The Florida Blues also take a pro-active approach by implementing the process of focused reviews on high-dollar exposure matters. For instance, twenty or more OB/GYN providers will be compared. What is the average billing per patient? How much is being run up in diagnostics? What is the percentage of a particular procedure per patient? Is Doctor A doing one D&C for every 20 patients while Doctor B does one for every three patients? When all is complete, the computer will flag any significant differences in the standard billing practices between providers. Those providers so flagged will command closer attention and eventual determinations will be made regarding those who may be overbilling, over-diagnosing or involved in downright fraud.
“Prosecuting doctors is very difficult,” says Chuck Hammaker of the Florida Blues. “They can pay for great lawyers and are highly respected citizens who maintain membership in medical societies and contribute heavily to charitable organizations.”
But when a doctor is prosecuted, as occurred in a high-profile Florida case a few years ago, it sends a hard-hitting message to the medical community. It’s a very important deterrent and makes the doctor question if it’s worth the chance of losing his medical license and going to jail. “This message was shouted loud and clear when a Miami doctor and his office-assistant wife were both sentenced to prison terms,” stated Hammaker.
Blue Cross Blue Shield of Michigan, where it all started, and still said by many to be the most successful health care fraud unit in the USA, takes a traditional law enforcement approach when investigating suspected fraud, according to Greg Anderson who oversees the operation of the unit.
Some of the investigative techniques employed include computer analysis, surveillance, undercover visits to providers, patient interviews, medical reviews and development and use of informants.
Once the investigators have substantiated the potential fraud, they actively pursue prosecution by referring the case to the appropriate law enforcement agency. They then continue to assist in the investigation throughout prosecution by a local prosecutor or U.S. Attorney, including courtroom testimony. Blue Cross Blue Shield of Ohio employs the same methodology.
The Michigan group works in tandem with numerous other law enforcement agencies. These include the Federal Bureau of Investigation, U.S. Postal Service, Internal Revenue Service, U.S. Secret Service, Drug Enforcement Agency, Michigan State Police, Detroit Police Department and City and County law enforcement agencies.
Believing in a social responsibility to the general populace as well as its customers, BCBSM became the first health insurer of its kind to help design, support, and eventually pass the Health Care False Claims Act (HCFCA), signed into law by Michigan’s legislature in 1984. The act, first of its kind in the USA, provides specific felony penalties ranging up to ten years in prison, with fines up to $50,000 per count for attempting to
defraud a third party health care insurer. Since that time, many other Blues have used this legislation as a model to develop similar legislation in their respective states.
Statistics released by the National Health Care Anti-Fraud Association indicate that the percentage of bad providers hovers between two and three percent. But, even though this means that the great majority are honest, the small dishonest percentage can do a great deal of monetary damage to a company and result in higher future premiums for the policyholders.
The Federal Department of Justice is becoming more involved in the fight against Medicare fraud, and since the Florida Blues also handle Medicare, investigators from the two agencies often work hand-in-hand on cases of abuse or fraud. Currently, there are five special task forces operating in the state and two-thousand-dollar crimes are being prosecuted just as vigorously as hundred-thousand-dollar crimes.
The Florida Blues units have been operational since ’89. On the Medicare side, the estimates are that the Blue’s SIU recovers $12 for every single dollar invested in its operation. This compares with a three-to-one ratio for the regular provider SIU. The difference, according to Hammaker, is attributable to the size of the Medicare cases and the huge amounts of money involved.
Although the Blues are all independent from one another, they offer support and cooperation among their network members. If a Virginia subscriber is visiting Arizona and has a heart attack, the companies will work in tandem to assure the best possible claims handling. Strangely, however, an out-of-stater seeking treatment far from home is often a red flag to the insurer and is flagged for further review based only on the geographies.
This is because of a somewhat recent scam that has been sweeping the nation, most prevalent in California and other warm-weather locations. In these cases, unscrupulous providers are wooing well-insured individuals into taking “treatment vacations” at spa-like facilities in the name of health care. These deals often include free cross country air fare and up to a month of supervised weight-loss or depression confinement. Substance abuse and suicide prevention programs are also popular. Cost to the insurer? Often in excess of $40,000.
These upstanding medical providers pbint 1-800 telephone numbers in newspaper ads that ask the reader things like “Depressed? Need to Lose Weight?” and then include information like “Insurance coverage accepted as full payment.”
What’s a 5-foot-tall, 200-plus-pound New York state employee going to think about spending the month of December in Las Vegas at his insurance company’s expense?
Louis Lovato of California Blue Shield warns, “If you see claims for patients who are treating in these kinds of out-of-state programs, review the file very carefully. A New Yorker does not have to go to California for treatment of depression.”
“Many cases have been uncovered where charts appear to have had the names plugged in as if it were a fill-in-the-blank form,” Lovato continued, “and when the records are examined closely, it appears likely that the therapist never saw the patient whose chart he signed.” On a case scrutinized by the California Blues, the patient appeared on one form as a 34-year-old black female and on another form as a 52-year-old white female. This would suggest either a blind therapist – or – a file that screamed for SIU review.
One innovative investigator, checking out a questionable Las Vegas in-patient psychiatric treatment facility, shot surveillance footage of the hospital van taking the overweight patients to a local Over-eaters Anonymous (OA) meeting. Upon arrival at the meeting site, the majority of the van passengers opted to enter the door to the OA meeting, but a couple of them instead headed down the street to a Burger King. Video footage includes these not-so-depressed folks indulging in an eating binge of great proportions.
Although numerous facilities around the country are currently investigative targets (or should be), the most publicized case to date involved a string of “hospitals” that hit the radar screen of Blue Cross of California in early ’91. Senior Fraud Investigator David R. Ignatius, who began by investigating an anonymous tip, soon found himself knee-deep in a case of gigantic proportions. Today, over three years down the road, the case is awash in law suits and trudging toward a lengthy legal battle between the insurers (Aetna has since joined the war) and the hospital’s owner and practitioners.
Other scams run the gamut.
Another problem on the increase involves the treatment of AIDS patients. Many doctors appear to be taking advantage of the health care system in their decision on in-patient vs. out-patient services. Patients with good benefits may well receive treatment in a hospital at a cost of approximately $1,000 per diem when the same care can be administered by a visiting nurse at a significantly lower cost.
Employee fraud occurs when individuals within the company who have a high level of authority to adjust claims lose sight of their ethics and principles. They can create bogus claims and bogus reimbursements. They can defeat the editing system because they know it so intimately. Sometimes legitimate claims are modified by adding line items or other diversions. In most cases a co-conspirator is involved, perhaps a spouse or other relative/friend who has a BCBS policy.
In one case an employee sent checks to her husband, using his own actual BCBS medical coverage through his employer. She stole over $200,000. The bit of irony is that the husband was the number two man in the security department of his corporation. Both were prosecuted and sent to prison. And using the Federal court system allowed the Blues to recover full restitution by attaching the couple’s home. This was allowed due to unique confiscation provisions applicable in cases of money laundering. In this case, the employee had purchased the home with what was deemed to be laundered money, so the home was able to be seized.
Duplicate billings are common, most prevalent when a workers’ compensation carrier is paying for a claim and a second set of billings are sent to the health care provider. On occasion, the doctor is the perpetrator. Other times the fraud is wholly attributable to the patient. Still other times they are working in tandem. In most cases, the companies never find out about each other because they write different lines of coverage and
their index sources are not the same.
Drug fraud seems to be on the decrease, but instances are still uncovered on a regular basis. In one recent case an employee in a doctor’s office would phone in prescriptions and refills to numerous area pharmacies. Once she picked up the pills, she’d sell them to her girlfriend, an elderly lady in a retirement community who had quite a business going selling them to her other friends and neighbors. Later investigation revealed that the doctor had never authorized any of the prescriptions and, when confronted, the employee readily confessed and returned over $30,000 to Blue Shield upon demand.
Alternative cancer cures and unapproved medical treatments are often billed to insurance companies via slight changes in the records. Fertility treatments may be billed as hormonal replacement therapy or a body molding tummy-tuck procedure might show as a scar reduction or lysis of adhesions.
Diagnostic testing can be a common source of fraud. Some unscrupulous labs will design misleading forms and a doctor can unknowingly order a variety of tests that are far beyond what is reasonable and customary. National Health Labs was fined for a scheme of this nature and the $110,000,000 fine levied was the highest in history for this kind of a case. It was paid in full within four months and inside stock holders kept right on buying as many shares as they could get their hands on.
“Scooter cases” are a current hot button in the health care fraud industry. When a motorized wheelchair is ordered for a patient, the Durable Medical Equipment (DME) provider substitutes a $2,000 scooter for the $6,000 wheelchair. The patient, not being aware of what he was supposed to receive, does not complain and the unscrupulous DME provider pockets the difference. This scam is not isolated to one company or one area. Many cases have been discovered; however, it is almost always the result of the companies being pro-active and doing follow-up checks on large-tag equipment orders.
Border area billing services are springing up in the San Diego area and billings are primarily from providers in Mexico. The bills reflect the inflated California rates and there are many questions of accuracy. Some cases are alleged to involve patients splitting proceeds with the billing services. Cases thus far seen that fit this profile are coming from providers in Tijuana and Rosarita Beach. A similar facility in El Paso has
been shut down, but carriers are well advised to pay special attention to such claims.
Billings from foreign countries other than Mexico must also be scrutinized carefully. Fee levels should be checked prior to payments as there may be a wide discrepancy between the usual and customary rate and that being charged. Some unscrupulous individuals will take advantage by submitting a bill in Hong Kong dollars instead of American dollars.
“A Sacramento policyholder walked into our Placerville claims office and hand-delivered a bill for an appendectomy done in Hong Kong,” related Lovato. “The bill was for three times the amount it should have been, but we only found this out by doing our homework.”
Another case reported involves food-poisoning treatments allegedly administered by hospitals in Nigeria. When two nearly identical files were compared, the billing forms were found to be duplicates, with only the patient names and the hospital names changed. The diagnosis section was word for word, as was the rest of the file. At this time, the potential for organized fraud is being investigated and it is suspected that the problem extends far beyond the initial two cases.
Europe provides its own form of abuse to the American system. It is common practice for a European person to go to a spa-like setting for R&R after a surgery and the cost is often covered as a benefit. Not so on USA policies. To get around this, a policyholder from the USA might have his diagnosis changed so coverage is afforded. The same thing occurs for certain rejuvenation procedures (i.e., sheep cell embryo therapy) that are not approved on most USA policies.
Prosecution is very difficult in the cases involving foreign providers. Imagine the cost of flying a doctor here from Nigeria to testify while a clever lawyer plays delay games.
One tool in the arsenal against foreign frauds is the Newsletter in International Assignment Advice published by First Services of New York, an agency that specializes in this line of business. The newsletter publishes cases that have been filed with the agency, listing them by country, matter, details and interested parties.
A brief list of red flags for foreign claims includes misspellings, attached medical records when none have been requested, prices listed in US currency and full English records from a non-English speaking country.
Given the entire picture, it appears that the Blues have a good handle on fighting health care fraud. “It’s a war, one that shows no signs of slowing down,” says Craig Plassmeyer of the California Blues. “There’s been no reduction despite a concentrated effort by law enforcement. Here in California, we’re trying to improve the quality of our staff, provide more training to underwriting and claims operation areas and make the general public more aware.”
Ohio’s Fowler sums up the feeling of the Blues by sending this message to other health care companies, “Fraud will never disappear. The reason is that you can never be in front of the curve of human ingenuity. Stop allowing yourselves to be victimized. Do what we’re doing and do it vigorously. Implement a very active anti-fraud program, staff it with professionals and cause the prosecution of people who steal from you.”
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