Data Mining to Root Out Health Care Fraud in the Private Sector

Front-end analytics represent the future of fraud prevention

Posted by Dawn Lomer in Government Program Fraud, Healthcare Fraud, SIU & OIG on February 11th, 2014

In a field fraught with dishonesty, the health care fraud investigator must use whatever tools he or she can to root out corruption and keep the system working for those who need it. It’s a mammoth task, considering that health care fraud costs the US an estimated $80 billion per year and the costs of health care continue to outpace inflation, putting the well being of all Americans at risk.

To combat the threats, health care fraud investigators rely on technology to uncover and expose fraudulent billings and medically unnecessary services schemes that are becoming increasingly complex. As these schemes continue to proliferate, health care fraud investigators employ some of the latest technology to catch the fraudsters.

“Technology is what we count on to find outliers in various billing schemes,” says Dr Gary Cicio, DPM, clinical director of fraud investigations for WellPoint, Inc. “Because the bad guys markedly outnumber the good guys, just like in the Wild West days. There are a lot more aberrant billers than there are people to chase them down, in both the commercial side and in law enforcement,” he says.

Pressure, Opportunity, Rationalization

Dr Cicio attributes the rise in health care fraud schemes partly to the pressure caused by the combination of shrinking reimbursements and rising expenses. Some physicians, he says, have resorted to finding creative ways of making up the lost income.

“There are lots of doctors who bill in the grey areas,” says Dr Cicio. But these aren’t the ones he’s after. He searches out the bigger fish. “These people are really the in-your-face gluttons. And those are the ones you really try to contain.”

FREE Investigation Report Template

Prepare thorough, consistent investigation reports with our free report template.

Download Template
One of the barriers to investigating health care fraud against private insurance companies is the lack of commitment from law enforcement. It creates an opportunity with few consequences. “If you steal from Medicare or Medicaid, you have some chance that you’ll get arrested, lose your license and go to jail,” says Dr Cicio. It’s not the case for those who steal from commercial insurance companies, who often hire a lawyer who negotiates a payback that’s just a fraction of what was stolen.

“If you can steal a million dollars and only have to give back half a million, that’s a pretty good job. And the people who steal with reckless abandon know that,” says Dr Cicio. “Until they put something in place where a doctor actually has some realistic fear of losing their livelihood and losing their license, it’s never going to change.”

And since so many people dislike insurance companies in general, health care providers rationalize the theft as getting the insurance companies back for whatever wrongs they have committed, says Dr Cicio. “Insurance companies in general in the United States system don’t make warm and fuzzy victims.”

Data Mining for Outliers

So health care fraud investigators leverage the best tools they can find to combat the fraud schemes, and one of the most effective is data mining. “You look for outliers,” says Dr Cicio. These could include doctors billing for services that are outside their areas of expertise. Or they could just be doctors with extremely high billings.

“There’s always going to be somebody who’s the number one biller of appendectomies or tonsillectomies,” he says. But if you’re number one and six times higher than your next nearest peer, that could be a red flag.

By scrutinizing the doctors who are making the most money, health care fraud investigators sometimes uncover fraud. But just because a doctor makes a lot of money, doesn’t automatically indicate fraud, he warns. “You might be the best of the best… but you might not be the best of the best, you might just be the best biller.”

Future of Health Care Fraud Prevention

For Dr Cicio, the future lies in even more advanced technology, such as solutions used in the credit card industry that flag transactions that are outside a customer’s patterns of activity. “It’s a system that effectively gets smarter the more data it processes. It learns,” says Dr Cicio. These technologies can profile a health care provider’s patterns of billing so that when he or she deviates to a significant degree, it is flagged for analysis before it is paid.

The future of health care fraud prevention and detection also depends on the commitment of those tasked with finding and eradicating it. As new schemes pop up, investigators must stay ahead of the fraudsters. Experienced and dedicated fraud-fighters, such as Dr Cicio, are key, and the National Health Care Anti-Fraud Association (NHCAA) recognizes this, prompting it to name Dr Cicio as its 2013 Medical Director Award recipient for his significant contributions and outstanding accomplishments to the field of health care fraud-fighting.

Dawn Lomer
Dawn Lomer

Managing Editor

Dawn Lomer is the managing editor at i-Sight Software and a Certified Fraud Examiner (CFE). She writes about topics related to workplace investigations, ethics and compliance, data security and e-discovery, and hosts i-Sight webinars.