Common Denominators Universal Challenges and Perspective for CEOs William J Mahon The Mahon Consulting Group LLC ID: 815337
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1
Health Insurance Fraud: Crime Without Borders
Common Denominators, Universal Challenges
and
Perspective for CEOs
William J. Mahon
The Mahon Consulting Group, LLC
International Federation
of
Health Plans
Lisbon, June 27, 2018
What Is
Health Care Fraud?An intentional actIntended to obtain a benefit, or a greater benefit, to which the perpetrator is not entitledOften joined with
“
waste, abuse, inefficiency,
”
but those are not statutorily defined criminal acts
Can involve any party within the health care/health insurance system, and increasingly, professional criminals who target private and public payers.
3
4
5
USA: 30-Year History of Émigré Schemes
Brighton Beach (Brooklyn), NYRussian criminal ringsGreater Los Angeles (Burbank/Glendale)
Russian actors, Armenian “
Vors
”
South Florida
Panamanian, other Central/South American actors
San Francisco / Bay Area
Filipino actors
11
Present Day: The Brothers Kabov
Berry
Kabov
, age mid-40s
Professional bodybuilder
Slide1212
The Brothers Kabov
Dalibor
“
Dabo
”
Kabov
, age mid-30s
Former NBA free agent & D-League player
Slide1313
The Brothers Kabov
Owners: Global Compounding Pharmacy, Los Angeles
Slide1414
The Brothers Kabov
Indicted/Arrested 9/15
50 Counts
Conspiracy to Distribute & Distribution of Oxycodone/Other Narcotics
Conspiracy & Importation of Schedule III Controlled Substances from China & Mexico
Money Laundering & Conspiracy
False Tax Return Re: $1.5 million in Income Underreported
U.S. Attorney’s Office
Kabovs
operated Global “for the purpose of concealing and growing their conspiracy to profit from black-market sales of narcotics”
2014 CA Pharmacy Board inspection concluded Global was “front for a drug-trafficking operation”
Allegedly shipped thousands of concealed oxycodone tabs to buyers in Ohio.
Jury convicted on all counts 1/23/17—sentencing still pending
Each faces 300+ years in federal prison
Slide1515
The Brothers Kabov
Along the way, also billed for compounded prescription drugs
1 TPA-administered health plan, 10-month period in 2014-15
$2.6 million in compound scripts, 5 prescribers
2 prescribers = $2.35 million
1 of the 2 prescribers since pled guilty to other crime:
$11.1 million Medicare fraud
Use of marketers to recruit & deliver patients
Performed medically unnecessary diagnostic tests/other services
Falsely prescribed & certified eligibility for $10,000 power wheelchairs
Kabov
brothers paid kickbacks to L.A. “
medi
-spa” owner in exchange for health-plan member names and ID; fabricated
scrips
in unwitting patients’ names
Slide16Universal Anti-Fraud Drivers
Impact on ever-increasing private and public costsInseparable link to quality of care/patient safety
Widespread media awareness and attention
Increased customer awareness and expectations
Increased Senior Management awareness and expectations
Slide30Greatest Exposure = Provider-Based Frauds
Providers (or purported providers) are the focus of 85% or more of U.S. payers’
fraud investigations
Provider-fraud tools:
Patient population to exploit
Possible conditions & treatments to bill
Wide 3rd-party billing authority
Patient/provider/payer
information
= the vital commodity
Slide31Most Common Forms of Provider Fraud
Billing for services not renderedMisrepresentation of services provided
“Is
upcoding
fraud?”
Deliberate provision of medically unnecessary services, often linked to patient recruiters and inducements—kickbacks, “free” services
Slide32Common Denominators
Wide range of simultaneous targetsMultiple payersPrivate & public plans
Multiple insurance lines
Elimination of patients financial interest, or actual financial inducements for patient
Often follows new/expanded benefits, new treatments & technologies
Occurs across entire provider spectrum
Slide33The Collateral Damage—Universal
Corruption of patients’ medical histories
Theft of patients
’
finite health benefits
Physical risk/harm to patients
Medical identity theft
Slide34Worldwide Anti-Fraud Challenges
Inconsistency/diversity of medical standards, regulatory oversight and enforcement actions across regions and countries
Wide variances in procedure costs across regions and countries, with lack of centralized comparative cost data
Lack of
“
boots on ground
”
investigative resources in many regions or countries
Inevitable advent of fraud related to growth industry in medical tourism
Emergence of international marketing of health care services—e.g., adverts in U.S. in-flight magazines for South America cosmetic surgery clinics
External & Internal Challenges
Nature of some frauds far less clear to critical audiences Many cases inherently more complex, harder to argue and to prove intent
Some health insurers wary of alienating good providers
Inherent tension between Fraud Investigation and other operating units with potentially conflicting priorities
Claims
Provider Relations
Provider Network Management
Lingering misconception that Managed Care eliminates incentives and opportunities for provider fraud
Little or inconsistent coordination between private payer and government-plan anti-fraud activities
35
Slide36Slide37For Better or Worse, U.S. Leads the World in Fraud Losses
Estimated 3% to 10% of annual U.S. Health Expenditure*$3.7 Trillion in 2018*
Translation
:
$111 billion to $370 billion
in 2018 alone
> 30-year history = most mature & comprehensive anti-fraud infrastructure (statutory, regulatory, technological)
U.S. experience = opportunity for other insurance systems to progress more rapidly
*
SOURCES: U.S. Government Accountability Office; National Health Care Anti-Fraud Association; Centers for Medicare & Medicaid Services—National Health Expenditures data
Slide38The Crime—U.S. Federal Laws
“Health Care Fraud”
18USC, Ch. 63, Sec. 1347
Whoever knowingly and willfully executes, or attempts to execute, a scheme or artifice—
1. To defraud
any
health care benefit program; or
2. To obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of,
any
health care benefit program, in connection with the delivery of or payment for health care services, shall be fined under this title or imprisoned not more than
ten years
, or both.
Slide39The
Crime—U.S. State-Laws“Health Care Claims Fraud
”
New Jersey Annotated Code, 1997
Health Care Claims Fraud
means
making
, or
causing
to be made, a false, fictitious, fraudulent, or misleading statement of material fact in, or
omitting a material fact
from, or
causing
a material fact to be omitted from, any record, bill, claim or other document, in
writing, electronically, or in any
other form
, that a person
attempts
to submit,
submits
,
causes
to be submitted, or
attempts to cause
to be submitted for payment or reimbursement for health care services.
Slide4040
The Crime—Other U.S. Laws
Federal False Claims Act
Treble Damages
Per-claim
penalty of $10,957 - $21,916
Federal Anti-Kickback Statute
Prohibits offer, solicitation, provision or receipt of “anything of value”
Cash
“
Ping-pong
” referrals
Sham professional services agreements
Free office space/admin services
Violation taints any resulting claim
False Statements Related to Health Care
Obstruction of Health Care Investigation
State False Claims and Anti-Kickback statutes
Slide41Not An Option. . .
In U.S., most state insurance laws and regulations require substantive & effective anti-fraud functions as a condition of insurance / HMO licensure :
Formal fraud plans and annual activity reports
Special investigation units & staffing levels
Training—entry & ongoing
Fraud-Warning statements in claim, enrollment, other policy documents
Reporting of suspected fraud/referral of cases to authorities
Slide4242
U.S. Industry – Government Response
Nat’l Health Care Anti-Fraud Assn.
1985
Private-Public Non-Profit
Information-Sharing
Education & Training
Investigator Accreditation
Federal
FBI
Medicare/Medicaid Program Integrity
Centralized data analysis re: Detection & referral
Offices of Inspectors General
Health Care Fraud Prevention Partnership
State & Local
Medicaid Fraud Control Units
Medicaid Inspectors General
Recovery Audit Contractors
State & local police Drug Diversion Units
Slide4343
International Industry – Government Responses
E.U.
European Healthcare Fraud and Corruption Networ
k
U.K.
Health Insurance Counter-Fraud Group
NHS Counter-Fraud Authority
Canada
CHCAA
CLHIA
Australia
DOH Provider Benefits Integrity Division
PHA Fraud Community of Interest Group
South Africa
Board of Healthcare Funders
Healthcare Forensic Management Unit
Slide44Recognize the Value
Health Insurers’ Anti-Fraud R.O.I.Average anti-fraud budget: $2.04 mil.
Average savings & recoveries: $11.1 mil.
Average R.O.I.: 7.5 to 1
Best operations
’
ROI: 12 - 15 to 1
Blues
’
average PMPY return: $3.43
Best operations
’
PMPY return: $7.50
Average insurer anti-fraud budget = $0.43 PMPY
Beyond the Dollars
Preservation of employee benefits
Member/patient protection
Slide4545
Key CEO Takeaways
Fraud risk is as inherent in health insurance as in any line—and perhaps more so re: Its complexity
There’s much more than money at stake
Private-public cooperation & industry information-sharing are a must
Detection/analysis technology is not a “magic bullet” but a necessary tool for greater efficiency & effectiveness
Pre-payment avoidance/prevention = “The Holy Grail” but. . .
Is easier said than done
Operational impact must be anticipated and accommodated
“Audit” & “Investigation” are not synonymous
Audit identifies the “What”
Investigation establishes the “Why”
The anti-fraud function cannot be
siloed
—it must be “woven into the fabric”
Your strong and visible support is vital to its effectiveness and success
And finally, a keen eye for the obvious never hurts . . .
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Brock P:
“
Charlatan: America
’
s Most Dangerous Huckster, The Man Who Pursued Him, and the Age of Flimflam,
”
Three Rivers Press, New York, NY, 2008
Slide48Before . . .
Slide49After . . .