Best Practices for Employers to Combat Claims-Related Health Care Fraud

A version of this article was published in the November 2021 edition of Healthcare News.

The onset of the COVID-19 pandemic created significant, highly publicized upheaval to the health care delivery system. Equally disruptive, the industry also had to face a delayed impact to COVID-19 payer claims processing workflow and provider revenue cycle.

With the millions of transactions that health care payers process and the billions of dollars paid each year to providers, COVID-19-related claims significantly increased the likelihood of payment integrity risks.

Performing an audit of health care claims could help payers and self-insured employers uncover these mistakes, reduce medical expenses, and improve the member’s experience, which underscores employee overall satisfaction with employer benefit plans and cost controls.

Learn more about the following:

  • What is health care fraud?
  • How can you identify fraud, waste, and abuse in health care?
  • What is the impact of health care claims processing mistakes?
  • How can employers prevent fraud, waste, and abuse with health care claims?
  • What are the benefits of a health care claims audit?
  • How has COVID-19 contributed to fraud, waste, and abuse in health care?
  • What does the Department of Justice focus on to help combat fraud in health care?

What Is Health Care Fraud?

Health care fraud is the intentional deception or misrepresentation of fact that can result in unauthorized benefit or payment. Abuse means actions that are medically unnecessary or improper, inappropriate, and outside of acceptable standards of professional conduct.

Waste comes from errors, such as incorrect keying of billing codes, misuse of modifiers, and more deliberately through excessive treatments, overuse of medical services, medication and prescription refills, billing for unnecessary medical equipment, and unnecessary medical appointments.

Implementing best practices along with fraud, waste, and abuse (FWA) counter measures payers can continue to mitigate rising health care costs and claims processing waste.

How Can You Identify Fraud, Waste, and Abuse in Health Care ?

FWAs are harbingers of significant cost increases to the health care system. 

Total government health care expenditures have doubled since 1990, rising from 11.9% to 24.1% in 2018. National health care expenditures accounted for 17.7% of gross domestic product (GDP) in 2019. Spending is projected to grow at an average rate of 5.4% through 2028 as costs increase faster than the growth of the economy, according to the Centers for Medicare & Medicaid Services (CMS).

The National Health Care Anti-Fraud Association (NHCAA) estimates health care fraud impacts the United States about $68 billion annually, or 3% of health care spending. Other estimates range as high as $230 billion, or 10% of annual health care expenditures. 

Considering that employers pay for over half of Americans’ health care, and that average family premiums rose 4.4% in 2020, according to the Kaiser Family Foundation, cutting FWA is paramount for employers.

FWA Examples

Common examples include:

  • Billing for services not received, rendered, or documented
  • Inflated or exaggerated billing for services provided
  • Unbundling of services
  • Upcoding for services performed
  • Performing medically unnecessary services or free services as defined by their plan
  • Accepting kickbacks or bribes for patient referrals
  • Billing for nonexistent prescriptions
  • Scheduling excessive office visits
  • Misrepresenting non-covered services as medically necessary
  • Billing the patient more than the co-pay
  • Allowing impossible events, which could be billing for timing or quantities that can’t occur, such as billing for 26 hours in one calendar day

What Is the Impact of Health Care Claims Processing Mistakes?

Of the $3.6 trillion spent on health care annually, the NHCCA estimates that tens of billions of dollars are lost due to health care fraud specifically, according to The Challenge of Health Care Fraud, published in April 2021.

Other government and law enforcement agencies’ estimates range as high as 10% of annual health care expenditure, or more than $300 billion.

For employers, private and government alike, health care fraud and abuse increases the overall cost of doing business. This inevitably translates into higher premiums and out-of-pocket expenses for employees as well as reduced benefits or coverage.

For many Americans, the increased expense resulting from fraud could mean the difference between making health insurance a reality or not.

How Can Employers Prevent Fraud, Waste, and Abuse with Health Care Claims?

The best way to identify and prevent potential errors is to audit your claims, and many larger payer organizations have sound FWA programs in place. However, smaller payers and administrators may not have the infrastructure to perform adequate FWA detection.

When performing a claims audit or engaging with a third-party that can help you, it’s important to test along the claim continuum, which includes the following best practices.

Claims Audit Best Practices

Create New Processes
  • Develop robust claims auditing programs to test processing accuracy
  • Audit claims both through random sampling as well as targeted claims—such as testing specific claims by category or code
  • Create a process to monitor regulatory and federal waivers and changes
  • Leverage data mining and analytics to identify provider billing patterns and compare against provider contracts, covered benefits, regulatory requirements, and payment policies
  • Verify payment integrity with audit tools, claims editors, and scrubbing applications
  • Implement reliable, actionable reporting
  • Measure performance standards and industry metrics among your peers
  • Integrate real-time root-cause analysis
Collaborate with Your Employees and Brokers
  • Educate employees on FWA and share tips to identify and prevent FWA
  • Encourage employees to be diligent in monitoring their claims, reports, and invoices and to report suspicion of identity theft or fraud to the insurance company and CMS
  • Ask third-party administrators (TPAs), about their FWA prevention practices and policies

What are the Benefits of a Health Care Claims Audit?

Claims audits help you identify and prevent potential errors, and you can save money and improve employee experience.

Some employers, particularly smaller payers and administrators, simply don’t have the staff, expertise, resources, or infrastructure to perform adequate FWA detection. These organizations could benefit from employing an independent third party, who are experts at evaluating claims payment accuracy.

How Has COVID-19 Contributed to Fraud, Waste, and Abuse in Health Care?

The pandemic exponentially increased the possibility and opportunity for bad actors to commit fraudulent and abusive activities. Additionally, the corresponding upheaval to the health care revenue cycle created new areas of waste.

Multiple factors foster this growth of FWA, including:

  • Rapid introduction of new services, treatments, service settings, and corresponding billing and coding guidelines
  • Strained provider resources because of significant patient volume variability
  • Strained payer resources due to claim volume volatility and resulting staffing fluctuations
  • Inadequate ability to properly train employees and stay current
  • Incentives of COVID-19 add-on payments

Emerging Fraud and Waste Risks

With the emergence of COVID-19, certain scenarios cause an uptick in FWA. Telehealth, for example, shows vulnerabilities for fraudulent activity.

Opportunities increased to bill for unnecessary or unrendered services as physicians encouraged most patients to use telehealth to maintain their appointments.

Conditions created many waivers in potentially outdated billing and coding systems, increasing waste and mistakes.

Additional increases in FWA include:

  • Telehealth, including 144 new CPT codes and 270 total related services
  • Ineligible, excluded, or unqualified providers continuing to practice and bill in telemedicine
  • Diagnosis and treatment misrepresentations
  • Prior authorization requirements removals
  • Cost-sharing waivers for COVID-19 treatments
  • Coding irregularities in lab billing complexities
  • Testing schemes and lures including free tests, solicitations for CMS information
  • Vaccination scams
  • Coverages and cost-sharing misconceptions

What Does the Department of Justice Focus on to Help Combat Fraud in Health Care?

The following are specific audits and focus areas the Department of Justice added to its priority list as a result of COVID 19-related fraud, waste, and abuse activity:

  • Inpatient discharges with COVID-19 diagnosis
  • COVID-19 add-on lab testing
  • Home health services provided as telehealth
  • Medicare laboratory services and telehealth services
  • Contracts awarded for COVID-19 testing
  • Online scams selling fake and unlawful treatments and cures
  • Scammers posing as health care providers

We’re Here to Help

For more details on identifying and preventing health care FAW with a claims audit, contact your Moss Adams professional.

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