Davidnelson 2

THE EXTENT OF HEALTHCARE FRAUD, CORRUPTION AND
WASTE, A US PERSPECTIVE
European Healthcare Fraud & Corruption Network Conference
David L. Nelson, M.S., Director, Healthcare and Science

TABLE OF CONTENTS
• Thomson Reuters
• Waste and Fraud in The United States:
The staggering numbers
• Why is it so hard to measure?
• Technologies
• Results
©2010 Thomson Reuters
2
THOMSON REUTERS BUSINESSES & MARKETS
MEDIA FINANCIAL LEGAL TAX & HEALTHCARE

ACCOUNTING & SCIENCE
Reuters News Half a million 98% of world’s 99% of top US More than 20
reaches a billion professional major law firms accounting firms million research
people every day users globally use Westlaw use Checkpoint users worldwide
3
GLOBAL FOOTPRINT
300 CITIES 103 COUNTRIES
4 4
200+ 25+ State
Employers Governments
GE, FedEx, 11 state employers
GM, Boeing, 28 Medicaid agencies
8 HHS agencies
AT&T
3000+
Hospitals Federal
Triad, Tenet, Government
HFHS, Cedars- CMS, AHRQ,
Sinai CDC, SAMHSA,
VA, DoD
Unparalleled Expertise Across

Healthcare
100+
Pharmaceuticals Health Plans
All major U.S.

HCSC, Cigna,
pharma companies
CareFirst
5
THOMSON REUTERS
U.S. GOVERNMENT HEALTHCARE EXPERIENCE
NH ME
WA VT ME
AK ND
MT
MN MA
OR
WI NY
ID SD RI
MI
WY PA CT
NJ
IA
NE OH DE
NV IL IN
WV DC
HI UT VA
CA CO
KS MO KY MD
NC
TN
OK SC
AZ NM AR
MS GA
AL
LA
TX
FL
State Medicaid Customers

6 of 8 Federal Programs
6
INTERNATIONAL COMPARISON OF SPENDING ON
HEALTH, 1980–2007
Average spending on health Total expenditures on health
per capita ($US PPP) as percent of GDP
16%
$7,290
8%
$2,454
Note: $US PPP = purchasing power parity.

Source: Organization for Economic Cooperation and Development, OECD Health Data, 2009 (Paris: OECD, Nov. 2009).
WHAT IS HEALTHCARE SYSTEM WASTE?
•The New England Healthcare Institute

(NEHI) has defined waste in healthcare
as “Healthcare spending that can be
eliminated without reducing the
quality of care.”
8
1. Preventable Conditions $25-50
2. Lack of Care Coordination $25-50
3. Provider Inefficiency and Errors $75-100
4. Administrative Inefficiencies $100-150
5. Fraud and Abuse $125-175
6. Unwarranted Use $250-325
$600-850 Bn
9
HEALTH CARE FRAUD RATE U.S.
“In FY 2009, the National Health Care Anti-Fraud Association
estimates conservatively that at least 3 percent of health care
3% spending is lost to fraud.”
Daniel R. Levinson, Inspector General, Office of the Inspector General, U.S. Department of Health and Human
Services on Health Care Reform: Opportunities to Address Waste, Fraud and Abuse before The House Energy
and Commerce Committee, Subcommittee on Health, United States House of Representatives, June 25, 2009
“In 2008, government-wide “improper payments” cost the U.S.

Treasury $72 billion, or about 4 percent, of total outlays for
4% the related programs.”
Iglehart, J. Finding Money for Healthcare Reform — Rooting Out Waste, Fraud, and Abuse. New England Journal
of Medicine. 2009 Jul 16; 361(3): 229-31. Epub 2009 Jun 10.
U.S. Federal Bureau of Investigation (FBI) place the loss due

to health care fraud as high as 10 percent of the nation’s
10 % annual health care expenditure - or a staggering $226 billion
each year.
10
FRAUD RATES SUPPORTED BY FEDERAL
GOVERNMENT RESULTS
• 94 defendants arrested in ―Largest federal health care fraud takedown‖ in history
– Health and Human Services and Department of Justice combined to arrest 94 defendants in
Brooklyn, Baton Rouge, Detroit, and Miami for false billing for AIDS treatment, DME, physical
and occupational therapy, and home health care - July 2010
• $2.3 billion settlement with Pfizer for illegal promotion of several drugs, including
the anti-inflammatory drug Bextra.
– The illegal promotion resulted in false claims submitted to Medicare and Medicaid for non-
medically accepted uses of the drugs.
• $17 million settlement by a Florida physician

– Settled allegations that he billed the Medicare program for higher levels of services than were
actually provided, and for services that were never provided.
• $9.9 million paid by a Texas hospital to resolve allegations

– For more than two years, the hospital inflated charges for patient care in order to receive higher
Medicare reimbursements.
―Estimates of the total cost of health care fraud are difficult to obtain.‖
Source: Health Subcommittee Staff, Health Subcommittee, Committee on Energy and Commerce, Congress of the
United States, Sept. 20, 2010 , Hearing ―Cutting Waste, Fraud and Abuse in Medicare and Medicaid‖
11
HEALTH REFORM: INCREASING EFFORTS
• AntiFraud Health Care Fraud and Abuse Control
(HCFAC) Funding has increased
– FY 2008: $1.13 billion
– FY 2009: $1.36 billion
– FY 2010: $1.49 billion
• New enrollment requirements for all providers
• Focus on durable medical equipment and home health
care
• New and enhanced penalties for fraudulent providers
• New data sharing and data-collection provisions
• New funding to fight Medicare and Medicaid fraud FY
2011-2020
12
WHY IT IS SO HARD TO MEASURE LOSS DUE TO FRAUD?
Sorting Fraud, Waste, Abuse & Overpayment
Criminal Commendable
Waste Quality Best

Fraud Abuse Overpayment
Non-compliance Improvement Practices
errors
13
WHY IT IS SO HARD TO MEASURE LOSS DUE TO FRAUD?
Incredible Amounts of Data To Evaluate

14
WHY IT IS SO HARD TO IDENTIFY FRAUD?
DATA AND TECHNOLOGY ISSUE
• Sorting Fraud, Waste, Abuse & Overpayment
• Integrating many large data sets
• Integrating efforts across multiple payers
• Disparate systems
– most fraud found by comparing claim types (e.g. drugs, inpatient, outpatient,
professional, multi-payer)
• Old complex systems can’t be modified fast enough

• Pre-payment solutions will not catch all fraud
• Prompt payment pressure
• Claim lag and adjustments
• Complexity of the data elements
• Fraudsters constantly innovating
15
WHERE CAN FRAUD BE IDENTIFIED?
• Provider Enrollment
• Beneficiary Eligibility Check
Claims Payment
• Pre-Payment
• Post-Payment
16
TECHNOLOGIES BEING USED TO IDENTIFY FRAUD
Pre-Payment Post-Payment
Evaluation before a claim is paid Evaluation after a claim is paid
Providers
Submit
Claims
• Clinical editing • Data management and

• e.g. National Correct Coding warehousing
Initiative, AMA guidelines • Specialized surveillance and
• Predictive modeling utilization review tools
• New innovations • Data mining
• Integrity edits • Reporting
• Risk scoring • Predictive analytics
• Case management systems
• Public Records systems
• Audit and recovery tools

• New innovations
17
INTEGRATED DATA MINING
STAGE 1 STAGE 2 STAGE 3 STAGE 4 STAGE 5
! 
Data Building Application Knowledge
Data Collection Transformation Intelligence Delivery Management
Eligibility Privacy Protection Proven Methods Payment Integrity
Medical Inpatient Standardization Episodes of Care Data Mining
Mental Health Customization Performance Measures Provider Profiles
Rx Drug Enhancement Disease Staging Beneficiary Profiles Actionable Analytics
Outpatient Quality Assurance Norms / Benchmarks Reporting Frameworks Consulting
Professional Quality Improvement Market Scan Algorithms Training
Home Health Integration Referential Content Edits Research
Durable Medical Program Development Algorithm Library

Equipment
Clinical Measurement
Dental
Vision
Data
Lab Results Data Repository
Other
18 18
RESULTS OF POST-PAYMENT EFFORTS
$1.00 $3.00 - $12.00

Investment Return
Actual recovery versus cost avoidance
• Additional cost avoidance savings

19
72 HOUR READMISSIONS
Identified providers with higher readmit
rates within 72 hours for same
Diagnosis - indicates prematurely
discharging patients in order to
maximize reimbursement.
State Agency Policy: Readmission for

the same or related problem within 3
days of discharge is considered the
same admission. (and not eligible for
separate reimbursement)
State identified 150

providers and recovered
$1,100,000
20
ONE STATE EXPERIENCE: DASHBOARDS
• Personal Care/Homemaker Chore
– 909 providers identified for potential fraud
– 10 algorithms run
– Identified over $17 million in suspicious claims
• Adult Day Care
– 7 algorithms run, 2 with 8 iterations
– Identified over $15 million in suspicious claims
• Outpatient Hospital
– 10 algorithms run, 2 with multiple iterations
– Over $17 million in suspicious claims
• Dental
– 25+ algorithms run
– Over $9 million in suspicious claims identified
– Over $850,000 in solid overpayments identified
21
TIME BANDITS
Psychiatrists had claims for more than 12
hours of ―face time‖ with patients in a day
Provider #1 already indicted for Medicaid

fraud; pled guilty to 10 counts of causing
false Medicaid claims to be filed.
Provider #2 Owner of the counseling center

pled guilty to Medicaid fraud.
Additional providers:
5 new cases opened, Agency reimbursed
$165,000
1 new case referred for to the Medicaid

Fraud Control Unit (MFCU)
22
MORE EXAMPLES
Fraud Type Results (ROI)
Lab Services with No Episode of Care $18.8 million
Non-required Power Wheelchairs $50 million
Collusive Fraud Networks $32.5 million
Provider Re-Enrollment Saved almost $8 million during the re-

enrollment process
Medically Unnecessary Transportation Recovered $1 million in waste
Multiple “New Patient” Visits Identified $3.9 million in clear

overpayments
Inappropriately Billed Admissions Recovered $1.6 million in overpayments
Dental Services and Billing Identified more than $9 million in

suspicious claims
23
QUESTIONS
24
CONTACT:
David Nelson
Director
Healthcare & Science
Thomson Reuters
(734) 913-3432 Direct
(734) 913-3338 Fax
David.L.Nelson@ThomsonReuters.com
25

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THE EXTENT OF HEALTHCARE FRAUD, CORRUPTION AND

David L. Nelson, M.S., Director, Healthcare and Science

MEDIA FINANCIAL LEGAL TAX & HEALTHCARE

Unparalleled Expertise Across

All major U.S.

State Medicaid Customers

Note: $US PPP = purchasing power parity.

•The New England Healthcare Institute

“In 2008, government-wide “improper payments” cost the U.S.

U.S. Federal Bureau of Investigation (FBI) place the loss due

• $17 million settlement by a Florida physician

• $9.9 million paid by a Texas hospital to resolve allegations

Sorting Fraud, Waste, Abuse & Overpayment

Waste Quality Best

Incredible Amounts of Data To Evaluate

• Old complex systems can’t be modified fast enough

• Fraudsters constantly innovating

• Clinical editing • Data management and

• Audit and recovery tools

Eligibility Privacy Protection Proven Methods Payment Integrity

Medical Inpatient Standardization Episodes of Care Data Mining

Mental Health Customization Performance Measures Provider Profiles

Rx Drug Enhancement Disease Staging Beneficiary Profiles Actionable Analytics

Outpatient Quality Assurance Norms / Benchmarks Reporting Frameworks Consulting

Professional Quality Improvement Market Scan Algorithms Training

Home Health Integration Referential Content Edits Research

Durable Medical Program Development Algorithm Library

$1.00 $3.00 - $12.00

Actual recovery versus cost avoidance

• Additional cost avoidance savings

State Agency Policy: Readmission for

State identified 150

Provider #1 already indicted for Medicaid

Provider #2 Owner of the counseling center

1 new case referred for to the Medicaid

Fraud Control Unit (MFCU)

Collusive Fraud Networks $32.5 million

Provider Re-Enrollment Saved almost $8 million during the re-

Multiple “New Patient” Visits Identified $3.9 million in clear

Dental Services and Billing Identified more than $9 million in

Healthcare & Science

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