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By Eric Tackett
Investigative medical audits are, without question, one of the most effective and yet one of the most under-used tools in insurance fraud investigations. The problem has been that few people in the industry fully understand the potential these audits hold, and still fewer understand how to conduct an effective, comprehensive medical audit.
With the exception of vehicle damage, the medical file constitutes virtually the only physical evidence of fraud that will exist in any fraudulent claim. It should therefore be treated as a crime scene, rife with evidence that should be processed as carefully as any other.
In California, it has been the experience of successful investigators that more than 90 percent of all suspect clinics scrutinized in a comprehensive audit are found to be in violation of multiple sections of the state statutes regulating the provision of health care, and/or the accepted standard of practice in the medical/physical therapy community.
That said, it therefore should follow that somewhere near 90 percent of medical audits conducted should result in some basis for reduction in the claimant’s demand, if not outright denial of the entire claim.
However, medical overbilling or violations of specific statutes do not necessarily constitute proof of a fraudulent claim in and of themselves (although certain evidence may do just that).
But even in cases where the accident may be legitimate and simple billing errors have occurred, the potential exists for significant r lnc•1ion in the medical billing, even though the claim itself’ may 1101 he denied, or other damages may not be Initigated.
In cases where the classic indicators of medical fraud exist, an investigative medical audit should be considered standard operating procedure. In any given case, the $400 or $500 invested in the audit will be more than recovered by a skilled adjuster in settlement negotiations.
The investigative medical audit is broken down into three separate sections, any one of which may yield a wealth of information. They include the on-site clinic inspection, the clinic investigation and the medical file review.
The on-site inspection includes discreet observations of the clinic, both prior to entering and while inside. Once inside, copying the medical files affords the investigator an opportunity to observe and record a number of pertinent items, such as clinic personnel and patient traffic.
In addition to copying the files and inspecting the therapy rooms and equipment, any x-rays billed should be examined, not only to confirm their existence, but also to confirm the exact number of views taken. This and other factors regarding the x-rays become particularly significant later when the doctor’s report and billing statement are reviewed.
SCOPING THE SCENE
The clinic visit should also be used as an opportunity to identify clinic personnel, particularly those persons identified by claimants and treatment records as actual therapy providers. Clinic personnel, as well as the medical staff, should be questioned regarding clinic ownership.
The clinic investigation involves confirming medical, chiropractic, physical therapy and other licenses and certifications. This portion of the investigation also includes research as to the proper filing of fictitious business name statements, permits, business licenses and other documentation to establish proper ownership of the clinic and its legal operating status.
If a clinic operating under a fictitious business name has not filed a fictitious business name statement with the county clerk, it is in violation of the law. Such a non-entity would not be recognized by a court of law, and would therefore have no standing to file
a lien or lawsuit. `
Further, the California Medical Board requires that clinics operating under a fictitious name apply for and obtain a special permit. If the clinic does not have this permit, it is operating illegally and is subject to disciplinary action by the board.
Medical doctors and physical therapists who supervise aides in the provision of physical therapy must be certified to do so, and the absence of such certifications, issued by the board, render any therapy provided by aides improper and illegal.
The medical file review provides a veritable gold mine of documentary evidence of violations in the majority of cases where documents have been submitted by suspect clinics. The Medical Practice Act, the Physical Therapy Practice Act, the California Business & Professions Code, the California Code of Regulations and the Moscone-Knox Professional Corporations Act all contain regulations that would be difficult for a legitimate clinic to follow completely.
Crooked clinics, looking to make an easy buck, either are not aware of the work it takes to run a legally acceptable clinic or they just don’t care, knowing if they get caught, they can close down the current clinic and be back in business down the street next week. If these crooks knew how much was involved and believed they would have to comply to make a living, they might enter some other criminal endeavor that involves less work.
By the time an investigator has sifted through a medical file, (s)he has located not only evidence of multiple violations of statutes, but also discrepancies and outright contradictions in the information contained within the file.
VIOLATING THE LAWS OF PHYSICS
When the medical audit is preceded by a comprehensive claimant statement (and it should be), the entire claim frequently becomes almost laughable. You’ll have accident “victims” flying in different directions in a single impact, violating the laws of physics. You’ll have claimants describing injuries not found by the doctor, and you’ll find doctors describing injuries that the claimant denied receiving.
The claimant may also list physical therapy modalities not included anywhere in the medical documentation and, of course, you’ll have claimants who deny having received treatment that has been billed for (repeatedly).
On occasion, you’ll hear descriptions of the claimant’s treating physician that don’t even come close to the individual named on the medical license. A case in point involved a doctor described by all claimants involved as a female in her 30s. Investigative research showed that the doctor named on the license was actually in her 60s.
In short, it is virtually impossible for anyone to put together a fraudulent medical file without error. In many cases, the errors are frequent and significant, although there are those in the fraudulent claims business who are constantly improving and updating their methods. It becomes almost a battle of wits between the investigator and the crook. Fortunately for us, in a battle of wits, the crooks are frequently unarmed.
One of the more recent additions to our investigative arsenal is a state-of-the art method of examining patient sign-in sheets. Known as micro striation analysis, the process was developed by Signa Scan of Anaheim, California. Way beyond simple handwriting analysis, this method is more akin to the forensic science of ballistics analysis.
In fact, whereas graphology or standard handwriting analysis is considered mere opinion in a court of law, micro striation analysis has been accepted as scientific evidence in criminal trials, where the burden of proof is substantially higher.
When a comprehensive medical audit is conducted by a competent investigator, in conjunction with in-depth claimant interviews, there is rarely disappointment in the results. They are so consistently good, in fact, that investigative medical audits should be required as a matter of standard practice by insurance companies everywhere, whenever sufficient indicators of fraud are present.
Eric Tackett is a former law enforcement investigator, currently serving as manager of the Fountain Valley, CA, office of Specialized Investigations. He can be reached at 714/963-7915.
This article originally appeared in The Insurance Journal, November 14, 1994. It is reprinted with the permission of the author.
© 1995 John Cooke Fraud Report