Medical aid fraud, waste and abuse

Healthcare fraud is defined by the Association of Fraud Management as a “deception or misrepresentation that a person or entity makes, knowing that the misrepresentation could result in some unauthorised benefit to the individual or entity or another”.

Simply put, it is when a member, administrator or healthcare provider is dishonest in order to get money to which they are not entitled. Medical aid fraud is the most complex form of financial fraud to detect, monitor and prevent.

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Waste and abuse

Waste and abuse is far higher than fraud and is more easily quantifiable in terms of values as it is usually a clear contravention of tariff codes or a rule that exists. Most of the common practices include:

1. Billing for services not rendered (over billing)
2. Using incorrect codes for services (at a higher tariff)
3. Waiving of deductibles and/or co-payments
4. Billing for a non-covered service as a covered one
5. Unnecessary or false prescribing of drugs
6. Corruption due to kickbacks and bribery

Guilty parties

The culprits are not just medical practitioners, guilty parties are found all along the healthcare delivery chain – from medical practitioners through to employees, service providers and members. There has also been an increase in collusion between members and healthcare providers in order to attain illicit financial gain from a medical aid scheme.

There has also been an increase in cash back claims, this is when member are admitted to hospital for procedures that could have been avoided in order to claim through hospital insurance products. All of those involved in corruption are costing medical aid schemes billions of rand each year.

However, it is not just this collusion that results in fraud, abuse and wastage – it can also occur when there are errors at billing stage (using incorrect tariff and ICD-10 codes).

Cost of healthcare fraud

According to global and national surveys done by various role players in the industry such as KPMG, Ernest & Young, The Association of Certified Fraud Examiners (ACFE) and others, the costs of healthcare fraud may range anywhere between 5% and 15% to 20% of total healthcare expenditure, depending to which survey you refer.

Bonitas Medical Fund believes that the cost of healthcare fraud may be up to 7% of expenditure of which the majority is waste and abuse.

“Fighting fraud is one of our top priorities; as a result we have put a series of measures in place to ensure that the scheme is fraud resilient.”

“We already employ an arsenal of sophisticated strategies to deal with the challenge and significant progress has been made to enhance our prevention and detection capabilities. However, as fraud, wastage and abuse becomes more prevalent and sophisticated, so must the methods we use to combat it,” says Dr Bobby Ramasia, principal officer of the scheme.

IT forensic investigator

The system analyses a set of data by applying various algorithms over a period to identify “outliers” or abnormal data compared.

These outliers are then scored in terms of the probability of the data being fraudulent. For example, the system analyses all GP claims, compares them and if one set of claims stands out in the data set it is scored according to a level of difference in the claiming pattern. The results are referred to a forensic analyst, by means of a case management system, to review these high-scoring outliers.

“It also contains other reporting functionalities and an analysis tool which links any aberrant anomalies and raises the red flag for the forensic analysts so they identify possible syndicated or continuous fraud waste and abuse,” explains Ramasia.

“We investigate and act on every transgression and have increased recoveries in terms of losses. We are also able to provide better information and evidence to prosecuting authorities.”

“The system was only recently implemented, but initial results and indications are that levels of fraud, waste and abuse previously not identified have, and will be, identified for recoveries and or prosecution. Our predictions of a reduction in fraud of 8% therefore seem to be accurate. The system, like a good red wine, matures and improves over time as more data is collated, effectively predicting, preventing and managing fraud, waste and abuse,” he says.

“We have found that the biggest single deterrent to fraud, waste and abuse is to make it known that we are actively investigating every instance that is detected or we are made aware of.”

“Education in terms of the relationships with medical aids, their members and the healthcare providers goes a very long way in curbing the abuse of medical aid benefits and, as such, our approach in fraud management speaks to this education component.”

Medical aid fraud on the rise

“Medical aid fraud definitely appears to be on the increase. Thanks to intelligent technology and modern methods of fraud detection, we are able to identify more cases of healthcare fraud, waste and abuse. I am sure in the future, as the implementation of new detection methods mature, the curvature of healthcare fraud will plateau out and not reflect dramatic increase or decreases.”

Crime and punishment

According to Section 66 of the Medical Schemes Act, medical aid fraud, committed either by a member or a healthcare practitioner, is a criminal offence which carries a fine or imprisonment or both.

The core focus of the Healthcare Forensic Management Unit (HFMU) of the Board of Health Funders (BHF) is to facilitate a unified approach with regards to fraud in the medical schemes environment. This is achieved by sharing information regarding fraud, over billing and over servicing in order to minimise fraud across the industry and to protect medical schemes from healthcare providers and medical scheme members who shift their wrongdoings from one medical scheme to another once “caught out”.

In the case of healthcare providers, it depends on each and every judgement as well as the findings of the Healthcare Professional Council of South Africa (HPCSA) in terms of what punitive measures are to be imposed and each case is therefore adjudicated on its own merits.

Fraud, waste and abuse are categorised together but, in the event of fraud, it is harder to convict because of the burden of proof that rests with the victim in term of the Criminal Prosecution and Procedure Act.

“We find that waste and abuse is far higher than fraud and is more easily quantifiable in terms of values as it is usually a clear contravention of tariff codes or a rule that exists,” says Ramasia.

It must be mentioned that criminal prosecution is not the only remedy available to medical aids to address healthcare fraud; the Medical Schemes Act does provide various remedies for schemes to address and recover losses sustained due to fraud, waste and abuse.

The effect on schemes’ members

If one has a low recovery rate in terms of losses suffered, then the impact does impact the average contributions payable by members. Although medical fraud does have an effect on the members’ pockets, it is not the real driver of increased costs. There is a myriad of other factors contributing to increased healthcare costs.