1 Health Insurance Fraud: Crime Without Borders - PowerPoint Presentation

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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

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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.

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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

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Present Day: The Brothers Kabov

Berry

Kabov

, age mid-40s

Professional bodybuilder

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The Brothers Kabov

Dalibor

“

Dabo

”

Kabov

, age mid-30s

Former NBA free agent & D-League player

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The Brothers Kabov

Owners: Global Compounding Pharmacy, Los Angeles

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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

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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

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Universal 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

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Greatest 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

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Most 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

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Common 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

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The Collateral Damage—Universal

Corruption of patients’ medical histories

Theft of patients

’

finite health benefits

Physical risk/harm to patients

Medical identity theft

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Worldwide 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

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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

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For 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

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The 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.

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The

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.

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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

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Not 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

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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

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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

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Recognize 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

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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

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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

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Before . . .

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After . . .