Medical Fraud Waste and Abuse Explained

This video provides an in-depth explanation of medical fraud, waste, and abuse (FWA), a significant issue estimated by the FBI to account for 3-10% of all healthcare spending. Dr. Eric Bricker, the speaker, breaks down FWA into four distinct categories as defined by the Centers for Medicare and Medicaid Services (CMS): mistakes, waste, abuse, and deliberate fraud, focusing on their impact on employer-sponsored health plans. He emphasizes that while insurance carriers are theoretically responsible for catching FWA, their automated claims processing and historical refusal to allow external audits often lead to substantial financial losses for self-funded employers.

The presentation delves into each FWA category with vivid, real-world examples. "Mistakes" are illustrated by a $250,000 infusion medication claim that was double-billed to both a medical plan and a pharmacy benefits manager (PBM) by the same carrier, resulting in a half-million-dollar payout for a quarter-million-dollar service. "Waste" is exemplified by a healthy, normal-risk pregnant woman receiving monthly ultrasounds without clinical indication. "Abuse" is explained through "upcoding," where conditions like pneumonia or urinary tract infections were re-coded as sepsis to secure higher Medicare and commercial plan reimbursements, despite no change in patient management or hospital costs.

The most egregious category, "deliberate fraud," is highlighted with two impactful case studies reported by ProPublica. One involves a personal trainer for Southwest Airlines employees who billed over $4 million in physical therapy claims over several years, despite not being a licensed physical therapist. Another details out-of-network physical therapists in New Jersey charging $667 per "medical massage" to a state employee health plan with rich out-of-network benefits, a clear scam. Dr. Bricker points out that carriers often auto-adjudicate claims under $10,000-$15,000 without human review, allowing such fraud to persist, particularly in self-funded plans where the carrier bears no risk. He also addresses the common counter-argument that prior authorizations balance out FWA, illustrating with a diagram how both problems can co-exist and impact different providers, meaning neither should be ignored.

The video concludes by offering a concrete solution: independent auditing. Dr. Bricker advocates for employers and benefits consultants to hire separate data analytics firms specifically to review claims for FWA, thereby auditing the carrier's performance. He cites a benefits consultant who reduced health plan costs by 6% for large Fortune 500 companies by strictly addressing FWA. Another example includes an insurance captive that has kept healthcare costs flat for over a decade by employing two outside data analytics vendors to scrutinize carrier data. This "trust but verify" approach, enabled by demanding data access from carriers or switching to those who comply, is presented as a proven method to reclaim significant healthcare spending.

Key Takeaways:

• Significant Financial Impact of FWA: Medical Fraud, Waste, and Abuse (FWA) accounts for an estimated 3-10% of all healthcare spending, representing a substantial financial drain on health plans, including employer-sponsored ones.
• Four Categories of FWA: CMS categorizes FWA into Mistakes (e.g., double billing), Waste (e.g., unnecessary procedures), Abuse (e.g., upcoding for higher reimbursement), and Deliberate Fraud (e.g., billing for services not rendered or by unqualified personnel).
• Carrier Limitations in FWA Detection: Traditional insurance carriers often fail to detect FWA due to automated claims adjudication processes for claims under $10,000-$15,000 and a historical reluctance to allow external audits of their FWA departments.
• "Trust But Verify" is Essential: For self-funded plans, carriers bear no risk for FWA, making it crucial for employers to implement a "trust but verify" strategy rather than solely relying on carrier assurances.
• FWA and Prior Authorization Are Separate Issues: The existence of egregious prior authorization denials does not negate the need to address FWA; both are distinct problems that require separate solutions and can impact different providers.
• Independent Data Analytics as a Solution: The most effective strategy to combat FWA is to hire independent, third-party data analytics firms to review claims data and audit the carrier's FWA detection efforts.
• Actionable Steps for Employers: Employers should demand access to their claims data for independent review. If a carrier refuses, they should consider issuing an RFP (Request for Proposal) to find a new carrier that allows such audits.
• Tangible Cost Savings: Addressing FWA through independent auditing can lead to significant cost reductions, with one benefits consultant reporting a 6% decrease in health plan costs for large employers.
• Empowering Claims Management: With independent data analysis, employers can instruct carriers to stop payments on fraudulent claims or withhold future payments to providers who have previously received fraudulent payouts.
• Proven Success Models: Examples like an insurance captive maintaining flat healthcare costs for over a decade by utilizing multiple outside FWA auditing vendors demonstrate the efficacy of this approach.
• Data Access is Paramount: The ability to access and analyze comprehensive claims data is fundamental for identifying patterns of FWA that automated carrier systems often miss.

Key Concepts:

• FWA (Fraud, Waste, and Abuse): A broad term encompassing intentional deception (fraud), inefficient or unnecessary use of resources (waste), and practices that directly or indirectly result in unnecessary costs (abuse).
• Upcoding: Billing for a more expensive service or diagnosis than what was actually provided or justified, often to increase reimbursement.
• Auto-adjudication: The automated processing and payment of claims by an insurance carrier's computer system without human review, typically for claims below a certain monetary threshold.
• Self-funded Plan: An employer-sponsored health plan where the employer directly pays for employees' healthcare costs rather than paying premiums to an insurance carrier, making them directly responsible for FWA losses.
• Prior Authorization: A requirement from an insurance plan that a healthcare provider obtain approval before providing a service or prescribing a medication, often used to control costs and ensure medical necessity.
• RFP (Request for Proposal): A document issued by an organization to solicit bids from potential suppliers for a specific project or service, used here to find carriers willing to allow independent FWA audits.

Examples/Case Studies:

• Double-billed Infusion Medication: A $250,000 infusion drug was billed twice (medical and pharmacy claims) by the same carrier/PBM, resulting in a $500,000 payout for a $250,000 service.
• Unnecessary Monthly Ultrasounds: A healthy, normal-risk pregnant woman received monthly ultrasounds without clinical indication, representing medical waste.
• Sepsis Upcoding: A significant increase in sepsis diagnoses (from 248,000 to 541,000 cases) was observed after Medicare increased reimbursement, with conditions like pneumonia being re-coded as sepsis to gain higher payments without changes in patient care.
• Southwest Airlines Personal Trainer Fraud: A personal trainer billed Southwest Airlines' employee health plan over $4 million for physical therapy claims, despite not being a physical therapist.
• New Jersey Out-of-Network Massage Fraud: Out-of-network physical therapists in New Jersey billed $667 per "medical massage" to a state employee health plan with generous out-of-network benefits, amounting to significant fraud.
• Benefits Consultant Cost Reduction: A benefits consultant achieved a 6% reduction in health plan costs for Fortune 500 employers by rigorously addressing FWA through independent auditing.
• Insurance Captive Flat Costs: An insurance captive maintained flat healthcare costs for over 10 years by employing two outside data analytics vendors to audit carrier claims for FWA.