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Outside Cover - Front


Raymond V. Janevicius, MD, delves into rampant cosmetic and reconstructive billing schemes that are seldom detected and rarely investigated.

Clinical Analyst, Michelle Higginson, breaks down the fraud control concerns surrounding electronic health record system implementation.

Marty Ellingsworth, President of ISO Innovative Analytics, outlines the latest technology and analytics being used to mitigate health care fraud.



National Busts – Top fraud settlements, indictments, prosecutions and recoveries.


Decoding Health Care Fraud – Investigating the willful submission of false information.


Health Reform – Industry expert Brian Smith shares his take on the Patient Protection and Affordable Care Act.


Health Care Market Facts & Fraud Loss Projections – An overview of public and private costs.


Meet Jim Frogue – Speaking out to improve American health care.

Letter From the Editor – Profiler’s EditorIn-Chief discusses the focus of this issue.



Note to Self – Profiler picks the best books, websites, blogs and apps

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Profiler Magazine 10897 S. River Front Parkway Suite 200 South Jordan, Utah 84095

t's hard to believe that this issue of Profiler Magazine marks two full years of assembling, designing and distributing this magazine. When we decided to create a magazine dedicated to health care fraud education and prevention, we didn't quite know what we were getting ourselves into or how long it would last. However, we did know one thing; after having such a great time making the first issue, we had to keep it going and I'm glad we did. Fifty-thousand published copies later, we're returning to the theme of our inaugural issue of "All things fraud: Something for everyone." Our fourth installment features an eclectic blend of engaging and dynamic content including thoughts on the controversial health reform legislation and concepts from some of the brightest minds in fraud prevention and predictive analytics. In this issue of Profiler Magazine, esteemed plastic surgeon, Dr. Raymond Janevicius, pens a Profiler first, discussing the tactics dishonest physicians use to rob carriers of millions by burying unnecessary cosmetic surgeries under complex billing patterns. Profiler columnist and Registered Nurse, Michelle Higginson, continues her string of elegant and thought-provoking fraud control analogies, while ISO Innovative Analytics (IIA) president, Marty Ellingsworth, discusses the technology behind effective fraud detection and predictive analytics.

We're also pleased to share our Profiler Magazine Personality Profile with the sharp-witted and spirited Jim Frogue, Vice President and Director of State Policy for the Center for Health Transformation, whose knowledge and passion for fraud prevention is unrivaled. Rounding out this issue are Profiler's recurring pieces including Fraud Busts and Note to Self. We will continue to publish Profiler Magazine semi-annually, but we've decided to adjust our distribution dates. Moving forward, issues will be published and distributed with "Summer" and "Winter" subtitles. Look for the next edition to come across your desk early December 2010. In the meantime, keep up on the latest in health care fraud by visiting or email me ideas or articles at Since we first hatched the idea of Profiler, America's health care system has lost somewhere between $350 billion to over $1 trillion to fraud, abuse and overpayment. And the clock still ticks at the rate of $500,000 in losses per minute. While I continue to be shocked and appalled by the dishonest providers and criminals that are committing these crimes, I'm proud that we are doing something about it. Thanks for reading and joining us in the fight against fraud. Together we can make a difference.

Keep fighting the good fight and enjoy this issue.

Toll Free: 877.619.5557 Fax: 801.285.5801


HealthCare Insight


Darin Johnson


Deborah Evans


Mica Johnson

ASSOCIATE EDITORS Shane Sanders Emilee Schulzke


Dr. Raymond Janevicius Brian Smith Michelle Higginson Joseph DiDonato III Marty Ellingsworth

WEBSITE Copyright Š 2010 by Profiler Magazine All rights reserved. Materials may not be reproduced in whole or in part without written permission. For reprints of any article, contact the editor. *The opinions expressed by any contributors are not necessarily those of Profiler Magazine.


Dr. Raymond Janevicius, an Illinois plastic surgeon and President of Janevicius Consulting Corporation, is a renowned hand and reconstructive surgery specialist. With over 20 years experience in coding and reimbursement issues, Janevicius serves on the AMA CPT Advisory Committee and the American Society of Plastic Surgeons’ (ASPS) Coding Committees. He also authors the monthly column CPT Corner in Plastic Surgery News and is the Consulting Editor for CPT/ICD-9 coding in the peer-reviewed journal Plastic and Reconstructive Surgery.

Michelle Higginson, Registered Nurse and Certified Professional Coder, currently works for HealthCare Insight as a Clinical Analyst. Her professional experience as a Medical/Oncology Staff RN - partnered with volunteer work as a long-term care ombudsman and caregiver trainer - lend to her skilled, daily review of provider claims for fraud and abuse. Her current pursuit of a dual program graduate degree in Health Information Management and IT Leadership is sure to solidify Higginson as a true expert in her field.

Marty Ellingsworth, President of ISO Innovative Analytics (IIA), spends his days focused on advanced predictive modeling tools for the property/casualty insurance industry in order to deliver leading-edge analytics. A featured writer and sought-after speaker, Ellingsworth excels at clearly illustrating the power of predictive modeling. His 24–year career also includes positions at Full Capture Solutions, Inc., RiskData/HNC Software, Workers’ Compensation Research Institute, Beech Street Managed Care and the U.S. Air Force.


Profiler presents the best books, blogs, applications and websites you need to know about.

by Stephen Pedneault

by Myron D. Fottler & Donna Malvey

by Stephen Pattinson, Huw Thomas, Ben Hannigan and Roisin Pill

by the Center for Health Transformation

Providing unparalleled insights into what takes place during a fraud investigation, “Anatomy of a Fraud Investigation” is a valuable resource for fraud examiners, auditors, or employees who suspect fraud may be occurring in their organization. This inside look at a fraud inquiry helps readers better understand fraud detection, investigation and prevention. With over twenty-two years of experience conducting fraud investigations, Pedneault highlights the points that make fraud exploration interesting and challenging.

With U.S. health care in crisis, bold new options are being put into place. Authors Fottler and Malvey examine the phenomenon of retail health care from an entrepreneurial perspective, discussing the growth of retail care beyond traditional establishments and potential performance indicators to assess health outcomes. With differing perspectives from a variety of experts including doctors, nurses, patients and insurers, this book explores the part retail clinics will play in furthering the availability of health care in America.

This multi-authored volume charts how health care values have changed over the last forty years, helping health care professionals understand the past, evaluate the present and envision the future of America’s health care system. It examines how different health care groups and associations are responding to changing standards and outlines the practical implications for industry professions and professionals. The authors also look at how changing organizational values are manifested in specific contexts.

Recognizing that health care costs make up approximately one-seventh of America’s economy, the Center for Health Transformation has produced a book that many believe should be required reading for every policymaker in our government. A compilation of chapters written by various experts within the health care industry, ”Stop Paying the Crooks” aims to begin a national discussion about fraud, the ludicrous incentives that allow such fraud to thrive, and key strategies to bring schemes to an end.


The only website solely dedicated to providing today’s health care consumer with the knowledge and tools necessary to identify and combat health care fraud and abuse.

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Health blogger Deborah Leyva turns her attention to technology

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Profiler: What inspired you to study political science while attending the University of Southern California? Frogue: I entered USC as a business major but took a class in international relations my first semester. I liked it so much that I immediately switched my major. The following semester I took a political science class and eventually added that as my second major. I then completed a Master of Philosophy degree in International Relations at Cambridge. In 1998, I started doing health care policy for a Congressman because no one in the office, myself included, wanted to do it. The following year, health care policy became a full time gig.

primary focus is on Medicaid and fraud. In your opinion, what is the largest contributing factor to health care fraud in our nation and how do you feel we should be fighting it? Frogue: The largest, and ironically least acknowledged contributors to health care fraud are third party payors. So long as a public or private entity other than the patient is paying the bill, there will be less concern about final cost (which sometimes includes fraud) by doctor and patient. People with Health Savings Accounts and Health Reimbursement Arrangements spend less, yet remain as healthy as

Profiler: During your time as Director of the Health and Human Services Task Force at the American Legislative Exchange Council, you spent three years working with legislators, coordinating the development and dissemination of health policies. What was the largest lesson you learned from that experience? Frogue: I learned two big lessons. First is that there are tremendous, almost overwhelming opportunities to impact the health care debate in states. Second is that once a good idea takes root in a particular state and shows success, it can spread to other states very rapidly. It is hard to innovate but easy to replicate. Profiler: As the current Vice President and Director of State Policy for the Center for Health Transformation, your


when they never gave a thought to prices. The classic Rand Health Insurance Experiment showed this in the early 1980s. More recently this is being proven by the experience of Indiana state employees as outlined by Governor Mitch Daniels in his March 1st op-ed in the Wall Street Journal. Profiler: While testifying before the

Senate in 2009, you made comparisons between the U.S. health care sector and the American credit card industry. Can you elaborate on that? Frogue: Medicare and Medicaid mostly operate under a “pay-andchase� model where submitted claims are paid first and questioned later, if at all. The credit card industry works differently. First, credit card companies are much more rigorous in screening out bad vendors before they have the ability to bill (something Medicare fails at miserably). Second, they use advanced algorithms to flag questionable charges in real time. Nearly all of us have been asked by a store clerk to show ID when making a large purchase in an unfamiliar city. There are over $2 trillion in annual credit card transactions in the United States, which makes it twice as large as Medicare and Medicaid combined. Yet fraud in the credit card industry is less than one-tenth of one percent. Fraud in Medicare and Medicaid is at least one hundred times worse. Clearly, there is much that Congress and the bureaucrats who run Medicare and Medicaid have to learn. Profiler: When discussing Medicaid reform back in 2003, you suggested the Cash and Counseling program be used as a model for improvement. The Cash and Counseling program allows certain Medicaid beneficiaries to purchase their own services, with the help of a consultant, using a defined contribution from the state's Medicaid program. The beneficiary, not government bureaucrats or


politicians, decides where, when, and by whom his or her care will be delivered. Do you still believe this model is an appropriate “fix” for our Medicaid system? Frogue: The Cash and Counseling program is now in over a dozen states according to and it is serving low-income beneficiaries with more dignity while holding down costs. Account-based plans have proven effective across the income spectrum and serve as a model to fix our entire health care system over the long term. Profiler: Many Americans are depending on the government to repair our health care system, but consumers can play a large part in deterring fraud, thereby reducing premium costs and saving tax dollars. What are some tips you can give consumers to reduce health care fraud? Frogue: As a broad statement, consumers will only care about detecting fraud and abuse in their bills if it is their personal money at stake. Otherwise, a small handful of good citizens will report odd charges on their Medicare Explanation of Benefits or their hospital bills, if they can even understand them. But that will only amount to a tiny minority and will not make a significant dent in the problem. Aside from a wholesale shift to HSAs, the next best thing is for consumers and providers to aggressively and repeatedly report instances of fraud either directly or anonymously to bosses, insurance companies, elected representatives, law enforcement and/or the media. Profiler: The $787 billion American Recovery and Reinvestment Act of 2009 signed into law by President Barack Obama contains a wide variety of health policies, including more than $19 billion for health information technology. As an advocate for technology in health care, what types of measures would you like to see implemented as a result of this Act? Frogue: The American Recovery and Reinvestment Act of 2009 signaled the beginning of a much needed overhaul in our health care system’s health information technologies. The


stimulus money will help with enhancements in electronic health records, electronic prescribing, health data mining and much more. This financial infusion represents only the beginning though, as much more will be needed to move the health care industry into the 21st century. Profiler: You edited the Center for Health Transformation’s recent publication, Stop Paying the Crooks: Solutions to End the Fraud That Threatens Your Healthcare. What was your reaction when you were asked to take on this task? Frogue: It was something that suddenly seemed an obvious thing to do because we had access to so many bright, innovative experts with great solutions and there was no book out there like the one we were considering. I wanted to be certain the book was not merely a rehashing of the problems, but instead a manual of solutions that policymakers at the state and federal level could use to make a difference. I think we succeeded in that. I should add that none of the authors, including myself, were compensated financially for their contributions. Profiler: As a sought-after public speaker, you’ve given hundreds of speeches across the country. What is one message you always leave with your audience? Frogue: All messages must give hope. As wasteful as our health care system is, the good news is that we can only improve from here. Fortunately there are many, many solutions that will dramatically improve the situation and leave all of us non-criminals better off. Profiler: Having had the opportunity to work with numerous Members of Congress, Senators, Legislators, and other influential politicians, who has inspired you most and why? Frogue: The most inspiring leaders to me are those who took on complicated challenges against the winds of public opinion and ultimately prevailed. Thomas Kuhn describes how these processes take place in his 1962 masterpiece The Structure of Scientific

Revolutions. My favorite quote from that book is actually from Max Planck, “A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.” Specifically, I’ve been inspired by Newt Gingrich, Jeb Bush, Bobby Jindal, Mitch Daniels and Alan Levine. Profiler: Where do you see yourself in ten years? Frogue: I’ve never been able to answer that question and hope I never will. Profiler: Where would you like to see the U.S. health care system in ten years? Frogue: In his 2005 book The Singularity is Near, noted futurist Ray Kurzweil outlined the exponential rate of scientific change. If he is even a little bit right, it is hard to comprehend what health care might look like in 2020. Sadly, the financing structure we currently have in place will probably remain largely intact due to the extreme difficulty in upending large, established bureaucracies. But technology and the delivery of care will progress around our vintage 1965 reimbursement structures like an onrushing tide. Eventually, the irrelevance of a Medicare bureaucracy that tries to set 10,000 prices in 3,000 counties for 80 million people will be obvious to all. To paraphrase Planck, the old models will die and new ones will emerge.

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ne area of health care fraud seldom examined is plastic and reconstructive surgery. The classic scheme of attempting to obtain insurance reimbursement for purely cosmetic surgery certainly still continues, but many fraud strategies in reconstructive surgery go undetected and are rarely investigated. The perpetrators are becoming more creative and subtle. Investigators are unaware of many of these schemes and few Special Investigation Units (SIUs) are actively pursuing them. Yet many of these investigations are extremely straightforward, require minimal resources of time and personnel and will identify millions of dollars in overpayments.

of simple wound repairs to more complicated procedures such as complex repairs or flaps. A wound, whether traumatic or resulting after a lesion is excised, may be reconstructed in a variety of ways. Smaller wounds generally require straightforward closures, whereas larger wounds or those in vital anatomic locations may necessitate more extensive procedures, such as skin flaps (termed “adjacent tissue transfers” in the CPT book). The accompanying table summarizes the wound reconstruction CPT codes, in ascending complexity. Not all wounds repaired by a plastic surgeon are complex, nor do all wounds require major reconstructions.

WHAT IS PLASTIC SURGERY? Not all plastic surgery is cosmetic surgery. The “Nip/Tuck” stereotype portrayed by Hollywood and the media represents only a small segment of the spectrum of plastic surgery. Plastic surgery can be either cosmetic or reconstructive. Cosmetic surgery is performed on a normal body part to enhance its appearance (e.g. facelift, tummy tuck, nose job) and is definitely not insurance reimbursable. Reconstructive surgery is performed on an abnormal structure to restore form and function after trauma, tumor removal, infections, disease, or birth defects (e.g. skin grafting, burn reconstruction, hand surgery). By far, most plastic surgery performed is reconstructive so it falls within the realm of insurance coverage. RECONSTRUCTIVE WOUND REPAIR SCHEMES The most widespread abuse in reconstructive surgery is the upcoding

The reconstructive CPT codes have clear definitions and specific requirements for their use. For example, the repair of a 2.5 cm (1 inch) wound of the forehead with a layer of sutures below the skin and a row of sutures in the skin is described as an intermediate repair and is reported with code 12051. This is a standard procedure commonly performed by plastic surgeons. If more than a layered closure is performed (e.g. undermining), this constitutes a complex repair to be reported with code 13131.

COMPLEX WOUNDS A classic upcoding scheme involves claiming all wound closures are complex because a plastic surgeon repairs them. Complex repair has a clear, specific CPT definition and simply calling a wound complex is insufficient documentation to warrant reporting the 13XXX series. Just because the wound is on the face, or on a child, or it occurs at 2 AM, does not make the wound "complex." Strict CPT criteria must be met to use the complex repair codes. Some wounds are simply too small to require complex repair. If a 0.5 cm (1/4 inch) mole is removed, it's impossible to close this small wound with a complex repair. Reporting a complex repair for this procedure is considered upcoding. Detection Tip: Data mining will reveal a large number of complex repairs reported compared to the number of intermediate repairs and lesion excisions reported. Examination of pathology reports will reveal very small lesions excised and complex repairs reported. If most lesion excisions are closed with a complex repair, the surgeon should be investigated. ADJACENT TISSUE TRANSFERS - ABUSE OF FLAP CODES Extensive wounds or wounds in anatomically sensitive areas may require a flap for reconstruction - a method of tissue rearrangement to close a wound. A flap requires an additional incision and results in a donor site. The donor site then must also be repaired. Adjacent skin which is moved without additional incisions


does not constitute a flap as described by the adjacent tissue transfer codes 14XXX.

A widespread abuse is the reporting of undermining (loosening of tissues beneath the skin) as an adjacent tissue transfer or flap. Undermining should be reported as a complex repair (13XXX), not an adjacent tissue transfer (14XXX). Loosening of tissue beneath the skin does not involve an additional skin incision, nor does it create another soft tissue defect. Because these two criteria have not been met, a flap has not been created. Detection Tip: Data mining will reveal a large number of 14XXX series codes reported, especially when compared to the number of intermediate or complex repairs or lesion excision codes reported. Small lesion excisions are rarely repaired with flaps, particularly on non-facial areas. Flaps are rarely performed for laceration repairs, especially in children, and are seldom performed in the emergency room. Trends such as these are red flags that should be investigated.

Upcoding wound closures to complex repairs and adjacent tissue transfers results in significant overpayments. The detection and analyses of these cases are simple and straightforward: operative reports and billing records are compared for consistency with pathology reports and emergency room records. Other records are rarely necessary. An east coast insurance company representing three million lives recently identified over $7 million in overpayments for wound repairs by 30 providers. Relatively


simple analyses which are not timeconsuming have resulted in the identification of millions of dollars in overpayments. There's more "bang for the buck� in investigating flap code abuse, especially in the current milieu of limited resources. COSMETIC SURGERY SCHEMES Since cosmetic surgery is not reimbursed by insurance, there are incentives for unscrupulous patients and surgeons to try to obtain insurance coverage for purely cosmetic procedures. By misrepresenting CPT codes, dishonest surgeons try to manipulate the system to procure insurance coverage for cosmetic surgery. Breast reconstruction, a procedure that most insurance plans will cover, is performed to recreate a breast that has been removed for cancer. One method of breast reconstruction involves placement of an implant to form a breast mound, a procedure reported with CPT codes 19340 or 19342. A breast augmentation (enlargement) is a purely cosmetic procedure, in which a breast implant is placed within a healthy breast to make it larger. This procedure is reported with CPT code 19325, which is not insurance reimbursable. The classic scheme involves reporting this cosmetic procedure as a "breast reconstruction" and using CPT codes 19340 or 19342 for placement of the implant. Detection Tip: Breast reconstruction codes must always be linked with an ICD-9 diagnosis code that reflects breast absence and/or cancer, such as 174.X (breast cancer), V16.3 (family history of breast cancer), V10.3 (personal history of cancer), or V45.71 (acquired absence of breast). If a woman has breast cancer, there must be a previous biopsy, operative report and pathology report. A breast augmentation claim should not have a cancer diagnosis. TUMMY TUCKS VS. HERNIA REPAIRS A cosmetic abdominoplasty (tummy tuck) involves the removal of excess skin followed by skin and

muscle tightening to improve abdominal contour and appearance. This is not a procedure that should be covered by insurance, but the unscrupulous practitioner will try to disguise this procedure as an abdominal reconstruction. The muscle tightening (repair of diastasis recti) is reported as a hernia repair (49560, 49561, 49565, 49566) even though no hernia is present (ICD-9 552.X, 553.X). The muscle tightening is sometimes coded as a muscle flap (15734). Tummy tucks do not involve muscle flaps. Legitimate muscle flap reconstructive procedure for soft tissue defects of the trunk are extensive operations, most often performed on an inpatient basis. Others report the abdominal skin rearrangement of a tummy tuck as a skin flap (14XXX, adjacent tissue transfer). None of these reconstructive codes should be used to bill for cosmetic abdominoplasty. Detection Tip: Plastic surgeons rarely perform hernia repairs, so if a significant number of herniorrhaphy codes (49560-49566) are reported, the procedures should be suspect. A large number of muscle flap codes (15734) reported should also be investigated. Data mining and pivot tables will help, as most plastic surgeons will only perform one or two reconstructive muscle flaps a month. One should also be suspicious of muscle flap procedures performed as outpatient surgery. In suspected cases, analysis of operative reports and surgeon's office notes is necessary. Do surgical consents indicate abdominoplasty or tummy tuck with no mention of hernia repairs or muscle flaps? Have surgical fees been collected in advance, as with other cosmetic operations? RAMPANT UNBUNDLING Billing separately for each component of a global procedure is unbundling. Most plastic surgery involves the legitimate reporting of multiple procedures, especially in trauma, but some surgeons devise creative schemes for unbundling global procedures. For example, complex repair codes are global and include local anesthesia, debridement of tissue,

wound cultures (if indicated), undermining and repair of all tissue layers. A 2 cm thickness wound of the forehead closed with a complex repair should be reported with a single code, 13131. Instances of unbundling, such as the example in the table below, are frequently seen for such procedures.

(Six codes have been reported where one global code correctly describes the procedure.)

HAND TRAUMA ITEMIZING OR UNBUNDLING? Even small hand wounds can result in significant injuries to multiple structures, so correct coding involves the listing of each procedure. Often several tendons and nerves are repaired, each requiring a separate CPT code to accurately report the procedure performed. This is not unbundling. Example 1: A 2 cm laceration of the index finger with multiple structures injured. Two tendons are repaired, two nerves are repaired, an artery is repaired using the microscope and a fracture is reduced. Each structure repaired is correctly itemized with an appropriate CPT code. This is not unbundling. Example 2: A similar 2 cm laceration of the index finger which injures only one structure, the flexor tendon. The wound is explored, some debridement is performed, the tendon is repaired and the wound is closed. This entire procedure is properly reported with one code: 26356. Wound exploration, debridement and closure are included in the global code 26356. Listing all components of this global procedure is unbundling.


Detection Tip: Just because a large number of codes are used to describe a hand trauma procedure, it does not necessarily mean that the procedure has been improperly coded. Distinguishing between legitimate itemizing and fraudulent unbundling is very difficult and often requires review of complex operative reports by a hand surgeon knowledgeable in coding analysis. Certain nuances of global coding and surgical technique can frequently render analyses of these operative reports complicated. The amount in overpayments due to cosmetic and reconstructive surgery fraud is staggering, yet this field is not commonly scrutinized. Most plastic surgeons are very conversant with CPT coding so dishonest practitioners devise many creative schemes to manipulate the coding system. Payments for adjacent tissue transfers are double those for complex repairs. For the smallest wounds, even at Medicare rates, that's an overpayment in excess of $300 for each laceration. The payments for adjacent tissue transfers are quadruple those of lesion excisions when used to report mole removals. That's over $500 in overpayments for each mole removed. If a surgeon removes five moles a week, that's over $130,000 in overpayments a year for one surgeon for in-office procedures. Detection is extremely simple: compare the operative report with the pathology report. It’s time to begin investigating in order to deter millions of dollars in overpayments each year.


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Need help preventing health care fraud? The AHIP Center for Insurance Education and Professional Development can help with courses, publications, and more that cover everything from the fundamentals to key products, the federal and state governmental roles, and legal issues. Whether you choose a course or a publication, or focus on the Health Care Anti-Fraud Associate (HCAFA) designation, the Center has the tools you need.


AHIP, the national association representing approximately 1,300 health insurance plans providing coverage to more than 200 million Americans, is a leader in health insurance education. As the health care industry changes, you can count on us to bring you new educational programs that will help you continue to expand your industry knowledge of fraud and more. For more information on the HCAFA and other Center’s designations and courses, visit Content and Design AHIP—All Rights Reserved: © AHIP 2010

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Hiking the slot canyons of Southern Utah offers an adventurous experience that attracts visitors from all over the world. The narrow canyons and dramatic sandstone cliffs separate the hiker from the daily cares of life. Despite the beauty, there is inherent danger in these natural chasms. Rainstorms many miles away can create devastating flash floods that may leave hikers with no escape route. With careful preparation and the assistance of an experienced guide, however, the risks can be mitigated and safe navigation ensured. actually greatly increased and The enticement of government incentives is even facilitated [1]. Some drawing more providers into the canyons of electronic caution that rushing into adoption health record (EHR) implementation with the goal of will result in EHR systems that do improving patient care and controlling costs. There not provide benefits to either is certainly potential for EHR use to improve health patients or payors that are worth care in many ways, such as decreased medication justifying widespread use. The errors and reduced duplication of services. concern that fraud costs will increase is Payors hope that EHR use will also result in very real and must be acknowledged by new approaches to identify fraud and overpaypolicy makers and payors. ment in health care. With 2010 fraud loss Reports commissioned by the projections of as much as $262 billion, it is Office of the National Coordinator for imperative that new cost control methods Health Information Technology (ONC) in be adopted. But will EHRs actually 2005 and 2006 made recommendations for provide the hoped-for benefits in fraud EHR principles and standards that would be and overpayment control, or are there necessary to effectively manage and limit unseen downpours on the horizon? opportunities for health care fraud and abuse [2, According to some experts, 3]. The recommendations made by RTI Internaif proper controls are not built into tional in the 2006 report, Recommended RequireEHRs, the potential for fraud is ments for Enhancing Data Quality in Electronic Health Records, include stringent and specific access and audit capabilities that would not only protect EHRs from security breaches, but also allow comprehensive fraud control activities. Unfortunately, implementation of these measures is a long way off. There are many forces opposing adoption of the recommendations, the strongest of which are balancing fraud controls against the difficulty of actually getting



EHRs into widespread use and meeting the requirements for government-mandated meaningful use. EHR vendors and providers resist the idea of paying for something that will increase the cost and slow the functioning of their EHR systems. Patient and physician privacy advocates worry about allowing payers unfettered access to records. An evaluation of EHR fraud controls included in the government’s initial EHR certification requirements reveals cause for concern. The ONC published the interim final rule regarding meaningful use and certification criteria in January 2010, with changes expected to be made after public comment. Most of the initial requirements are geared toward patient safety measures, quality and reporting measures and improvement of clinical outcomes. Despite political promotion of the idea that EHR adoption will enable improved methods of combating fraud, the topic was not addressed in the goals used to guide adoption of the certification criteria [4]. ONC did specify that the interim final rule is only an incremental step, and has solicited public comment regarding whether specific measures for prevention and detection of fraud, waste and abuse could be added to certification criteria. Apparently recognizing that the criteria are lacking in critical areas, HHS convened a panel of experts shortly after release of the interim final rule to identify unintended consequences of EHR adoption. This is an important and necessary step; however, it is late in the process. Stage 1 objectives that do relate to fraud control include basic audit capabilities and access controls, but are nowhere near as comprehensive as extensive fraud management would necessitate. One of the most important EHR capabilities from a fraud detection perspective has been intentionally left out of the initial phase of the meaningful use requirements. According to the 2006 report to the ONC by RTI, “The use of advanced analytics and pattern detection is one of the strongest tools to prevent fraudulent behavior. The greater the degree of coding in a record, the greater the ability to prevent fraud [3].” In the initial interim rule, ONC did not include a requirement for the full use of structured and coded data because it is thought to be too difficult and technical at this stage of the certification process. In the meantime, they are requiring that EHRs be capable of presenting health information in “human readable format.” This certainly does not enable the sophisticated fraud detection capabilities that will be necessary to realize the


large-scale savings that payors are hoping for. ONC is seeking further public comment on industry readiness for adoption of certification criteria requiring use of coded data and vocabulary sets, but it is unclear at this time when such use will be required. With current changes such as ICD-10 already in progress and varying coded data and vocabulary sets in use by different entities, transitioning to uniform data standards will not be an easy or short process. Certification requirements will continue to evolve as users navigate the constricted corridor ahead. The initial ONC requirements mandated the capability for electronic claims submission, but without the necessary check that would be provided by a coded data requirement. This greatly increases the risk for an onslaught of fraudulent claims. According to America’s Health Insurance Plans (AHIP), approximately 75 percent of claims were submitted and adjudicated automatically in 2009 [5]. This number has risen sharply in the last few years, and it will not be long until all claims are handled electronically. Electronic claims submission is projected to save as much as $11 billion per year in claims processing costs, with even greater savings for full use of electronic data interchange in health information [6]. This is certainly a strong argument for electronic claims adjudication. However, without an accompanying requirement for coded data that will facilitate analytic tools, what does this mean for fraud control? Without adequate fraud detection and auditing capabilities, the health care system could end up paying billions more in fraudulent claims than it is saving in processing costs. Many benefits will eventually result from widespread EHR implementation for patients, providers, and payors. However, as vendors and users of EHR systems are more concerned with meeting the mandated requirements for certification than they are about fraud management, the day when the hoped-for benefits in fraud control will be available to payors could be a long way off. Although there may be storm clouds on the horizon, the fraud risks associated with increased EHR use can be managed with the help of an experienced guide. There are methods of fraud prevention, detection and management that can be put to effective use regardless of the type of medical records and claims adjudication processes. EHR implementation will not be a short day hike, but a long voyage into uncharted territory with rapidly changing conditions.

1. Simborg DW. Promoting electronic health record adoption. Is it the correct focus? JAMIA 2008;15: 127-129. 2. Report on the Use of Health Information Technology to Enhance and Expand Health Care Anti-Fraud Activities, Prepared for the Office of the National Coordinator, U.S. Department of Health and Human Services by Foundation of Research and Education, American Health Information Management Association, Contract Number: HHSP23320054100EC, September 30, 2005. 3. RTI International. Recommended Requirements for Enhancing Data Quality in Electronic Health Records. The Office of the National Coordinator for Health Information Technology. May 2007. 4. Health Information Technology: Initial Set of Standards, Implementation Specifications, and Certification Criteria for Electronic Health Record Technology, Interim Final Rule, Federal Register (15 Jan, 2010) 45 CFR Part 170. Print. 5. 6. Zieger, A. Electronic claims submission could save $11B per year. FierceHealthIT.


00100100100101010100100101 01001001010100100101011 01001001010100100101 0100100101010010 0100100101010 00100100100101010100100101 01001001010100100101011 01001001010100100101 0100100101010010 010010010101000100100100101 01001001010100100101011 01001001010100100101 0100100101010010 0100100101010 ou Smith* was truly a fortunate son. He joined one of his parents in practice, and for 15 years his income continued to grow. Indeed, it seemed like it would never stop — but it did. One day, something that Lou had failed to carefully consider changed his life and career in dentistry forever. His world came to a crashing halt with three little words: health care fraud. Federal statutes define health care fraud as the willful submission of false information with the intent to gain. This felony carries a penalty of up to 10 years or more in prison and can result in a dentist losing the privilege to practice dentistry due to “failure to comply with substantial provisions of federal, state, or local laws, rules, or regulations governing the practice of the profession.”


The National Health Care Anti-Fraud Association (NHCAA) estimates that 3 to 10 percent of the nation’s annual health care outlay is lost to fraud and abuse. This year, it is projected that health care spending will approach $2.5 trillion, making health care fraud and abuse a problem that could cost the industry somewhere between $77 and $255 billion. This is a liberal estimate considering that the 3 to 10 percent projection may not even reflect the extent of health care fraud in dentistry, which, in and of itself, is difficult to determine. HealthCare Insight (HCI), a company that provides fraud analytics to insurance payers, estimates that dental fraud, abuse, and overpayments result in annual losses of up to $11 billion for dental plans nationwide. According to the NHCAA Web site (, the most common health care fraud activities include upcoding and misrepresentation of services (e.g., unbundling); stolen patient identities; unnecessary diagnostic services; exploitation of benefit plans; services not rendered (e.g., false claims/charges); kickback arrangements among providers; waiving patient co-pays or deductibles; and overbilling the insur-

ance carrier or benefit plan. As the supplier of analytic solutions, Barry Johnson, DDS, CDC, FAGD, president and co-founder of HCI, gets a firsthand look at how third-party payers use data to look for fraud, abuse and overpayment. Dr. Johnson says, “Our applications are looking for coding rules violations — not benefits rules violations — which are revealed through ‘patterns of billing’ over time and which may include deliberate strategies such as upcoding and overutilization of certain codes.” According to Dr. Johnson, the analytic software enables HCI to “compare provider billing by specialty, so we would never compare an oral surgeon to a general practitioner. All of our modeling is done according to the specific provider practice type and specialty.” This process allows HCI to statistically model normative patterns of billing and code utilization. For instance, suppose a provider bills the code for full bony impaction with complications 40 percent of the time. HCI’s data indicates that out of all of the extraction codes, oral surgeons bill that particular code about 2.5 percent of the time. This discrepancy causes the system to question *Pseudonym


1100001000100100100101010011100101101101101010110101011101110100011100 and flag that provider based on the utilization of that code. Wayne Silverman, DDS, FAGD, who has more than 30 years of practice experience and consults with both dentists and insurance companies, follows the same process while conducting utilization reviews for either the insurance payer or the doctor. “We ask the doctor if this procedure is done on a regular basis and if extractions are always coded as a surgical extraction,” he says. If the doctor doesn’t know what is being coded, Dr. Silverman recommends that he or she run a production summary, an analysis report available from all practice management programs. From this report, dentists can see their own coding patterns. Providers need to understand how their submitted claims are statistically analyzed. At HCI, Dr. Johnson says, “Every line on every claim is compared with every line on every other claim that’s in that patient’s history and in that provider’s billing history for that patient. This allows us to recognize patterns within that patient’s history.” Dr. Johnson is careful to point out that the analyst will never deny a line or make a significant change to a line based on anything that requires diagnostic decision-making; rather, the analyst’s main concern is whether the line submitted violates a rule. An example of a rule violation is when two exams are billed on the same day for the same patient. That rule violation would be flagged, and the analyst would validate or invalidate the flag based on the rules. How are these rules created? “We used the CDT definitions and explanations and a panel of practitioners to look at each code

and then the next to determine whether a coding rule has been defined between these two codes in CDT,” Dr. Johnson explains.

0100100101010010 0100100101010 00100100100101010100100101 01001001010100100101011 01001001010100100101 0100100101010010 010010010101000 Violators will be prosecuted

So what was Lou doing wrong? Today, he admits that he was upcoding and unbundling. The American Dental Association (ADA) defines upcoding (or overcoding) as “reporting a more complex and/or higher cost procedure than was actually performed.” Unbundling of procedures is defined by the ADA as “the separating of a dental procedure into component parts with each part having a charge so that the cumulative charge of the components is greater than the total charge to patients who are not beneficiaries of a dental benefit plan for the same procedure.” Unbundling may include portions of a procedure that payers consider part of a final treatment.

Accused of fraud

To this day, Lou still doesn’t know how his activity was flagged. Software or a claim analyst with a skilled eye may have picked it up. As Dr. Johnson reveals, “We are not doing this by software alone.” In fact, the system identifies what analysts should look at; after that, nondentist analysts review the claim. If an edit requires a clinical opinion, it is passed to a consultant who is a dentist. “They review the materials on a daily basis and either validate or invalidate the edit on that claim line. Final recommendations are based on what our system has identified and the review and the decision of




0010010010010101001110010110110110101011010101110111010001110011001 an experienced dental claims analyst,” says Dr. Johnson. Audits aren’t always about discovering fraud, says Ric Crowder, JD, DDS, a member of the Academy of General Dentistry (AGD) Dental Care Council. Audits are simply one way for insurance companies to fulfill their obligation to their stakeholders, the state and patients. “Insurance companies market themselves to the consumer — our patients — as organizations that protect patients from fraud and procedures that are unnecessary, as well as monitor cost containment,” says Dr. Crowder. An audit in and of itself may simply mean that the company has to conduct a certain number of audits each year in a particular state. He adds that audits can also be prompted by patient complaints.


For any individual who is being audited, Dr. Crowder recommends to first sit down and take a deep breath — the sky is not falling. Begin by creating a file, documenting everything, such as names and phone conversations of anyone having a role in the audit. Although it may be a random audit, it is important for the dentist to determine the parameters in terms of what the auditor is looking for. Above all, Dr. Crowder says, tell the truth. “The easiest way to get through a deposition is to be truthful.” Dr. Silverman advises practitioners who are concerned about practice revenues to seek help with determining whether adjustments in clinical or management strategies would yield improvement. “Compromising integrity to supplant income is a slippery slope, with ample examples of bad outcomes,” says Dr. Silverman. While some may think that they can maintain an arm’s length from danger, they are in fact embracing the worst of professional fears — the potential for an expensive loss. In Lou’s case, the situation got very serious when he received a surprise visit. “The FBI arrived in full riot gear,” he says. “They came in and instructed the staff to step away from the desks and send the patients home. They shut the place down.” To be sure, most people think of health care fraud as a provider problem; however, there are indications that it’s a two-way street. In January 2009, UnitedHealth Group agreed to settle a suit with the American Medical Association and others for $350 million. The suit contended that rate data was manipulated so that carriers using the database would pay less when patients used out-of-network providers. The end result was a new structure for developing databases to calculate usual, customary and reasonable (UCR) fees.

Top Five Codes Under Review D4341, Periodontal scaling and root planning, four or more teeth per quadrant D2950, Core build-up, including any pins D7210, Surgical removal of erupted tooth requiring elevation of mucoperiosteal flap and removal of bone and/or section of tooth D2391, Resin-based composite, one surface posterior D2335, Resin-based composite, four or more surfaces or involving incisal angle (anterior) Source: Silverman, Wayne, DDS. “Five Codes Under Review.” Insurance Solutions Newsletter; September/October 2006. Reprinted with permission from Insurance Solutions Newsletter, 888.825.0298

The Most Common Fraudulent Acts 1. Billing for services, procedures and/or supplies that were never provided or performed.

0100100101010010 0100100101010 00100100100101010100100101 01001001010100100101011 01001001010100100101 0100100101010010 010010010101000 Inevitable Fate

After a lengthy legal battle, Lou served time in a federal penitentiary for health care fraud. He agreed to pay restitution and was ordered to pay a fine. The conviction triggered the state board to investigate, and Lou had to surrender his license to practice dentistry — with no assurance that it would ever be reinstated. Since Lou’s release from prison, he has been working diligently to try to regain a normal life. In


reflection, he says, “I have been greatly humbled by this experience. I can only say that if I had known what the cost would have been, I never would have engaged in such a reckless practice. Ethics is everything. If someone reads this and is dissuaded from doing what I did, it will have been a service.”

2. Intentionally misrepresenting any of the following,

for purposes of obtaining a payment — or a greater payment — to which one is not entitled. • The nature of services, procedures and/or supplies provided or performed. • The dates on which services and/or treatments were rendered. • The medical record of service and/or treatment provided. • The condition treated or the diagnosis made. • The charges for services, procedures and/or supplies provided or performed. • The identity of the provider or the recipient of services, procedures and/or supplies.

3. The deliberate performance of medically unnecessary services for the purpose of financial gain.

Source: National Health Care Anti-Fraud Association (


By Marty Ellingsworth

Marty Ellingsworth is President of ISO Innovative Analytics (IIA), a unit of ISO focused on delivering advanced predictive analytic tools to the property/casualty insurance industry.



he fight against business fraud has come a long way, but the struggle is no easier as some organizations and industries continue to rely solely on traditional fraud mitigation procedures. Even during the explosion of online and digital capabilities in the past decade, it has been common for business records to be paper-based and physically stored or managed. In turn, suspicious activities were often only uncovered manually or through whistleblowers. Most significant fraud investigations could only be conducted “by hand.” Cooperation among companies and industries to combat fraud was — some say remains — archaic and somewhat haphazard. Industries with hefty volumes of high-value customer and financial

transactions continue to be particularly vulnerable to fraud. Markets such as health care, insurance, mortgage lending and banking/finance daily contend with a variety of transaction environments where fraud can occur. Among the transactional activities that can induce fraud are: medical bills, third-party claims, attorney invoices, employee receipts, loan or insurance applications, insurance premium payments, agent commissions, accounts payable and special expenses. Even repair, replacement and recovery costs are susceptible to fraudulent activities. Detecting fraud can be difficult because so much transactional information is handled by sophisticated software. There may be no "paper trail" because all the information is stored in databases, spreadsheets, online, or other electronic solutions. The threats of fraud always

seem apparent in hindsight. But assessing corporate or organizational vulnerabilities up front is very challenging. In addition, the responsibility to manage those threats is spread among diverse operational units. Meanwhile, significant cash could be illegally seeping out of company coffers. It is obviously not good management practice to knowingly remain vulnerable to the many fraudulent schemes and abusive threats that persist in typical, daily business activities. Just as alarming, those who seek to perpetrate fraud tend to rank and seek out company vulnerabilities, creating a form of adverse selection in being susceptible to fraud and financial crimes. Criminals will take advantage of those who are lax about fraud mitigation and prevention measures. Therefore, taking steps against fraud and abuse in today’s world must be a

conscious decision. Some of the fundamental tenets of enterprise risk management (ERM) now hone in on management responsibilities to protect corporate assets and safeguard shareholder value against fraud. ERM is challenging traditional, manual fraud-mitigation practices and replacing them with automated business rules and datadriven analysis. Most anti-fraud initiatives today leverage analytic solutions to interpret and authenticate data from a range of third-party sources and data banks. The fusion of predictive technology and business intelligence systems are helping companies make efficient decisions on transactions ranging from medical payments and insurance coverage, to claims settlements and loan underwriting. The principles of prevention, detection, mitigation and resolution will continue to be indispensable to


combating fraud and abuse. Those efforts can now be much more proactive, collaborative and coordinated, both within companies and among organizations, in large part because of advanced technology, real-time access to better-quality data, expert rule models and predictive analytics. Increasingly, skilled technicians are using advanced statistical modeling software to transform raw data into actionable and dependable management information. Access to such practical data and advanced technology tools, combined with strong domain expertise, can greatly improve the ability to detect fraud and abuse. For example, data cross-validation processes can use large-scale databases for fact-checking as well as identity resolution. Chronologies, patterns and spatial relationships can be identified with cutting-edge datavisualization software and geographic information systems to uncover fraudulent activities. The induction of predictive analytics in fraud detection efforts is crucial. Utilizing predictive models to


identify risk and exploit patterns can lead to significant savings. Just as health care experts use predictive analysis to determine which patients are at risk of developing certain conditions like diabetes, asthma, heart disease and other lifetime illnesses, health care claims payors can use predictive analysis to determine codes likely of being abused or fraudulently exploited. Furthermore, providers most likely to commit such fraud or abuse can also be pinpointed and observed. A cultural shift to establish data quality, data aggregation and analytic methodologies as strategic assets is essential to truly optimize fraud-mitigation value. Companies must encourage investments in technology, modeling techniques and expertise. Success in combating fraud will also depend on teamwork and increased coordination across the enterprise and between companies, industry anti-fraud organizations and law enforcement — and even across industries. Using effective analysis, perceptive management teams are now even better equipped to identify dishon-

est behavior and fight fraud. That’s because investments in people, process and technology is greatly improving companies’ ability to identify patterns of fraud. They can further strengthen their proven fraud-fighting activities by tapping into scenario-based models to assign a numerical ranking to suspect events, often based on previous experience about the likelihood of fraud. Consolidating data and analytic resources is a critical area of innovation to combat fraud. Those resources can directly contribute to operational proficiency, enterprise risk management and shareholder value. Successful enterprises must continually invest in the necessary knowledge, tools and systems to deter, detect, mitigate and prosecute fraud or abuse. Increasingly, companies will come to rely on sophisticated controls and continuous, vigilant monitoring to prevent fraud and leaking cash flows. To disregard such analytic tools and techniques can jeopardize the organization’s service capabilities, growth potential and market durability.

The NHCAA Institute for Health Care Fraud Prevention

2010 Annual

Training Conference

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eform of this caliber will not signal a quick fix, especially for the legislators involved. Upon securitization of the bill, one element that jumps off every sheet of this 2,409 page document is the reality that “The Secretary” (Secretary of Health and Human Services) will soon become one of the most powerful individuals in America. The Secretary now has the power to literally redefine America's health care system, line-by-line and policy-bypolicy. The Secretary's power and duty now includes revisiting each sentence in order to define how to interpret and implement the bill. Never before has the expression “the devil is in the details” been more profound. In fact, a staggering $1 billion has been allocated to this effort by way of the Health Insurance Reform Implementation Fund. The words “The Secretary” are repeated 2,942 times throughout this document and most frequently arrives packaged with the words “the Secretary shall develop, promulgate, prescribe rules, regulations and guidance, establish a formula, consult with stakeholders, provide exceptions”…and so forth. It seems that health care, or rather the payment of health care services by third parties and government agencies could soon become a massive public utility regulated by the Federal Government. Existing State and local regulatory entities are held intact with prescribed roles, but based on this author's perspective, the Federal Government will establish greater control and stake claim to the last word. As a stand-alone entity, America's reformed $2.9 trillion health care system will equal the seventh largest economy in the world. The complex and idiosyncratic




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The Fraud Finder's Resource. Issue 4.

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