A Way to Fix Healthcare Fraud

This video provides an in-depth exploration of a practical methodology for self-funded employers to detect and mitigate healthcare fraud within their employee health plans. Dr. Eric Bricker, the speaker, emphasizes that addressing fraud is a crucial first step for employers to establish credibility before implementing broader healthcare cost containment strategies. The core of his approach involves a systematic analysis of claims data to identify specific patterns indicative of fraudulent activity, primarily focusing on providers who waive patient out-of-pocket costs to inflate service volume.

The methodology begins with the critical step of obtaining a paid claims file that includes provider identification, acknowledging that while the "allowed amount" (negotiated rate) might be proprietary and difficult to acquire, "billed charges" are sufficient for this analysis. The next phase involves scrutinizing high-volume, low-dollar claims, specifically those with billed charges under $2,000. This segment is often overlooked by major insurance carriers due to high auto-adjudication thresholds, making it a fertile ground for fraud. The speaker then advises sorting providers by the number of claims and looking for "little-known" providers who exhibit an unusually high volume of small claims, which raises a red flag.

Dr. Bricker illustrates this with compelling examples: a single doctor (e.g., dermatologist or cardiologist) with 800 claims annually at $550 each, totaling nearly half a million dollars, or a facility (e.g., chiropractor or physical therapist) with 1,100 claims at $780 each, approaching $900,000. He highlights that such volumes often imply an unrealistic daily patient load for a small practice, suggesting that the underlying fraud is likely the waiving of deductibles, co-insurance, or copays to attract patients. This practice, while seemingly beneficial to the patient, is fraudulent because it circumvents the plan design and drives unnecessary utilization. The video concludes with actionable steps for employers, ranging from alerting insurance carriers and state departments to strategic changes in plan design, such as adopting Point-of-Service (POS) plans for out-of-network issues or partnering with Third-Party Administrators (TPAs) that offer lower auto-adjudication thresholds for more granular claims review.

Key Takeaways:

• Prioritize Fraud Detection for Credibility: Employers should first address healthcare fraud within their plans to build trust and credibility with employees and providers before attempting other cost-saving initiatives.
• Data Access is Fundamental: Obtaining a paid claims file with specific provider IDs (tax ID or name) is essential for this analysis. While the "allowed amount" may be proprietary, "billed charges" are adequate for identifying suspicious patterns.
• Focus on High-Volume, Low-Dollar Claims: Fraud often hides in claims with billed charges under $2,000, as these are frequently auto-adjudicated by large carriers and receive less scrutiny.
• Identify Anomalous Provider Behavior: Sort claims by provider volume and specifically investigate "little-known" providers or facilities with disproportionately high claim counts, as this indicates unusual patient traffic.
• Waiving Out-of-Pocket Costs is a Key Fraud Indicator: Providers who waive patient deductibles, co-insurance, or copays are likely engaging in fraud to attract high patient volumes, which drives up overall plan costs.
• Aggregate Small Claims for Impact: While individual claims may be small, their aggregation over time can result in substantial financial losses for the employer, potentially equaling the cost of major medical events like an ICU stay.
• Immediate Reporting Actions: Alerting the insurance carrier or Third-Party Administrator (TPA) and the State Department of Insurance are crucial initial steps, despite potential bureaucratic delays.
• Strategic Plan Design Adjustments: For out-of-network fraud, consider transitioning to a Point-of-Service (POS) plan that eliminates out-of-network benefits.
• Leverage TPAs for Enhanced Scrutiny: If in-network fraud is prevalent, consider switching from a major insurance carrier to a TPA that can support lower auto-adjudication thresholds (e.g., $500-$1,000) to allow for more detailed claim examination.
• Limitations of Major Carriers: Large insurance carriers often have high auto-adjudication thresholds (e.g., $5,000-$10,000), making them less effective at identifying fraud within low-dollar claims.
• Consider Specialized Fraud Vendors: Employers can also engage specialized third-party vendors dedicated to healthcare fraud detection as an additional resource.
• Quantitative Examples of Fraud Impact: The video provides concrete examples, such as a single doctor generating $440,000 from 800 claims or a facility generating $858,000 from 1,100 claims, to illustrate how small claims quickly accumulate.

Key Concepts:

• Self-Funded Employer: An employer that assumes the financial risk for providing healthcare benefits to its employees, rather than purchasing a fully insured plan.
• Paid Claims File: A dataset containing records of healthcare services that have been paid by an insurance plan, including details like provider ID, billed charges, and dates of service.
• Provider ID: A unique identifier for a healthcare provider, such as a tax identification number (TIN) or National Provider Identifier (NPI).
• Billed Charges: The amount a healthcare provider charges for a service, which may differ from the "allowed amount" or negotiated rate.
• Allowed Amount: The maximum amount an insurance plan will pay for a covered healthcare service.
• Deductible, Co-insurance, Copay: Forms of patient out-of-pocket costs that are part of the health plan design, intended to share the cost of care and deter unnecessary utilization.
• Auto-Adjudication: An automated process by which insurance claims are reviewed and approved for payment based on predefined rules, often without manual intervention, especially for claims below a certain dollar threshold.
• POS Plan (Point of Service Plan): A type of health insurance plan that combines features of HMOs and PPOs, often allowing members to choose between in-network and out-of-network providers, but with higher costs for out-of-network care, or in some cases, no out-of-network benefits.
• TPA (Third-Party Administrator): An organization that handles administrative services for employee benefit plans, such as claims processing, for a self-funded employer.

Examples/Case Studies:

• Doctor A (Dermatologist/Cardiologist): An example of a single physician generating 800 claims within a calendar year, each billed at $550, totaling approximately $440,000. This volume suggests an average of three plan members seen daily, which is highlighted as an unusually high and potentially suspicious frequency for a single practitioner.
• Facility (Chiropractor/Physical Therapist): An example of a facility with multiple providers generating 1,100 claims annually, each billed at $780, accumulating to nearly $900,000. This demonstrates how even small-dollar claims, when aggregated, can represent a significant financial burden comparable to high-cost medical events like a major ICU stay.