HR Attacks Health-Care Fraud

By Stuart, Peggy | Personnel Journal, March 1995 | Go to article overview

HR Attacks Health-Care Fraud


Stuart, Peggy, Personnel Journal


We read a lot these days about health-care costs. While much of the debate centers on the escalating costs of providing treatment, we hear less about another menacing phenomenon--health-care fraud and abuse.

According to the Washington, D.C.-based National Health Care Anti-Fraud Association (NHCAA), as much as 10% of what the United States spends on health care is lost to outright fraud. Last year's dollar amount could be as high as $100 billion, according to the U.S. General Accounting Office. "Any health-care fraud means totally wasted dollars," says Jim Garcia, head of the health-insurance tracking unit for Hartford, Connecticut-based Aetna Life & Casualty Co. "It's making it difficult for us to compete in the world."

It may be a while before health-care reform takes effect. Even then, it's unclear whether any reform will address fraud and abuse. Employers and human resources professionals, therefore, need to take immediate, proactive steps to recognize and prevent such practices. Otherwise, a company could end up spending wasted dollars on health problems that never existed or were unnecessarily treated. Consumers, of course, would bear most of the burden through skyrocketing insurance premiums, higher taxes, increasing medical expenses, shorter hospital visits and inferior health services. So whether your company is self-insured or not, HR professionals must be involved in learning how to detect and prevent fraudulent practices early on.

Heath-care fraud and abuse include a variety of practices. The most common examples of fraudulent abuse include misrepresenting services, overcharging for services delivered or providing more costly services than required. Abuse may involve actions that are inconsistent with acceptable business and medical practices, such as the approach taken by one mother who called her infant's pediatrician to the house four times in two days--once at 3:30 a.m.--because the child had a cough. (Because the employer's health insurance covered the charges, the mother was unconcerned about the cost.)

Fraud, on the other hand, involves a willful misrepresentation, concealment or nondisclosure of a material fact or misleading conduct that results in some unauthorized benefit such as receiving money. For example, a provider bills the insurance company for procedures that weren't actually performed, along with legitimate claims for the same patient. Health-care fraud and abuse can be committed on any level or at any stage of the health-care delivery system. The culprits can be an employee, a service provider, an insurer, a lawyer, a claims processor or a third-party administrator and investigator. But San Francisco-based Blue Shield of California has found that most fraud and abuse practices it discovers occur among service providers, according to Louis L. Lovato, manager of the company's special-investigations department. Although the majority of health-care providers are honest and ethical, NHCAA estimates that about 2% engage in deliberate or systematic criminal attempts to defraud the private and public-payment systems.

The intent may be as innocent as trying to get the health-insurance company to pay for a needed treatment, or it may simply be an attempt to make extra money. Some examples of provider-generated fraud include:

* Overcharging;

* Billing for services not rendered;

* Rendering unnecessary or inappropriate services;

* Altering diagnoses;

* Waiving copayments;

* Submitting claims for free services.

Some of these practices may involve a conspiracy between the doctor and the patient, usually in an effort to get the insurance company to pay for a procedure that isn't covered by the insurance, such as a tummy tuck. "We get records and are careful, but plastic surgeons sometimes get these through," Lovato says.

Providers may be tempted to waive copayments for a patient who seems to be in need of treatment but unwilling or unable to take on the expense involved. …

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