US Health Care is going through a major upheaval with the passage of Patient Protection and Affordable Care Act (PPACA), also known as Health Care reforms. PPACA includes several reforms like guaranteed health insurance, increased MLR limits, setting up of Health Insurance Exchanges, adoption of ICD-10 standards etc. These reforms will lead health plans to look for new initiatives and solutions to manage Health Care Fraud, Waste and Abuse (FWA) in post-reform scenario.

With PPACA, there is a potential of 30 million new customers entering the Health Insurance market which will result in high claim volume, creating a needle-in-a-haystack scenario for identifying fraud. Because of the sheer number of claims processed, erroneous claims can go undetected, easily bypassing rule edits in most claims adjudication systems.

Beginning in 2014, consumers including individuals and small businesses will be able purchase health insurance from the new health insurance exchanges established by the Act. This will drive up the customer acquisition cost of payers. The new Medical Loss Ratio (MLR) limits will also force payers to cut an average of 15-20% of administrative costs to maintain margins. As a result, health plans would look at reducing the amount of money lost in fraud, waste and abuse.

Health reforms also mandate replacing International Classification of Diseases-9 (ICD-9) with ICD-10 code sets. This transition from ICD-9 to ICD-10 code sets poses immediate challenges for Payer’ Special Investigation Units (SIU’s) due to confusions arising from code set mapping errors and increased risk of false positives from standard FWA analytics engines

Today, most of the health plans are focusing on deploying product solutions to manage fraud, waste and abuse cases. These analytics solutions rely only on the output of Rule Engine and/or Scoring Engine to identify suspected claims which leads to high false positive rates. Need of the hour is a shift in approach from only product centric model to a more services based model where services like claim validation, recovery, post-claim analytics, rules and model enhancement etc would complement FWA Analytic Engines to deliver more efficient outcomes.

Healthcare fraud is an intentional deception or misrepresentation made by a person or an entity s, knowing that the misrepresentation could result in a payment to which the person or entity is not entitled. As healthcare fraud is seamless, it tends to blend making detection a challenge.

Fraud detection and prevention tools are no longer a “nice to have” but a critical element for sustaining the business. The damages incurred due to health care fraud has increased exponentially over the past few years. To reap the advantages of health care reform it is essential to strengthen fraud, waste and abuse protocols with strong processes, tools and services.

The National Health Care Anti-Fraud Association (NHCAA) estimates that the financial losses due to health care fraud are in tens of billions of dollars each year. As per the numbers provided by the Federal Bureau of Investigation[Ref], fraud, waste, and abuse account for 3 to 10 percent of the total health care expenditure. These losses lead to a causal system where increased health care costs are met by a surge in cost of coverage. The disproportionate surge of coverage as against income burdens the end customer.

The comprehensive solution to this issue is a two-pronged approach. Many organizations are not adequately staffed to review the high volume of claim activity that requires validation.

There is a need to provide aid in designing processes and services for claim validation, tracking, and recovery services to interpret the data output from their traditional tools, such as rule engine, scoring models. This would help in dealing with the volumes of claims that require validation leading to potential recovery of losses.

HCL offers an experienced professional claim validation and recovery management team that is capable of auditing high claim volumes. This team can either compliment a health plan’s current staffing or act as a completely outsourced unit for the plan.  If health plans do not have appropriate fraud detection tools in place, HCL along with its partner vendors can offer tools that aid in the identification and detection of FWA claims and links.

Find out more about our FWA solutions in our next blog…