License to Steal: How Fraud Bleeds America's Health Care System

By Malcolm K. Sparrow | Go to book overview

1
Control Failures

What makes the health care system in general, and claims-payment systems in particular, such attractive targets for fraud? Why (if public opinion on the subject turns out to be correct) does fraud continue to run rampant, attracting such an extraordinary array of characters? Why has health care become America's favorite get-rich-quick playground?

The fundamental reason is that the industry's standard detection and control systems are not aimed at criminal fraud at all. The software "edits" and "audits" built into modern, highly automated claims processing systems have all been designed with honest providers in mind and serve the purpose of catching errors, verifying eligibility, making sure procedure codes match up with the diagnoses, and checking that the price charged is within bounds. When claims fail these standard tests, the system automatically returns them to the submitter, with a computer-generated explanatory message detailing exactly what they did wrong.

Criminals, intent on stealing millions of dollars as fast as possible, have an easy time. All they need to do is to aim their claims smack in the center of medical orthodoxy and policy coverage--like finding the sweet spot on a tennis racket--and they can rest assured the automated systems will process their claims at the speed of light and with no human involvement at all (a process called "auto-adjudication"). In other words, to beat all the industry's prepayment defenses, all they need to do is bill correctly. Provided they bill correctly, they are free to lie. They can fabricate or alter diagnoses. They can bill for additional services that were never performed. In many cases, they can fabricate entire medical episodes, and even bill for courses of treatment for patients they have never ever seen. The rule, for the thieves in the system, is simple: Bill your lies correctly. Provided they do that, they can rely on the payment systems to process their lies correctly, and pay them.

-39-

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License to Steal: How Fraud Bleeds America's Health Care System
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Preface vii
  • Introduction - Who Steals, and How? 1
  • Part One - The State of the Art 37
  • 1 - Control Failures 39
  • 2 - How Goes the War? 56
  • Part Two - New Frontiers for Control 81
  • 3 - False Claims 83
  • 4 - Managed Care 98
  • Part Three - The Nature of the Fraud-Control Challenge 115
  • 5 - The Pathology of Fraud Control 117
  • 6 - The Importance of Measurement 143
  • 7 - Assessment of Existing Fraud-Control Systems 162
  • 8 - The Antithesis of Modern Claims Processing 183
  • Part Four - Prescription for Progress 201
  • 9 - A Model Fraud-Control Strategy 203
  • 10 - Detection Systems 228
  • Conclusion 253
  • Acronyms and Abbreviations 257
  • Notes 259
  • Index 277
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