Making the Case for Not Just Making the Case

I posted details of a crime where “ the identities of providers were stolen to validate claims when “said providers did not render any such services and never worked for NHMG on the dates of service listed on the claims submitted.” From a Justice Department press release “ 

https://www.justice.gov/usao-pr/pr/three-individuals-indicted-arrested-health-care-fraud

I post these cases because with minimal investment in available technologies, this fraud would not have been possible. Companies like Castlestone, which I founded, take a prevention-first approach to fraud reduction while enhancing post-payment analysis. 

When I posted this article, one of the responses I got was from Matt Lawhon, an attorney in Texas who has on-the-ground experience as a fraud investigator. Matt wrote on LinkedIn when I posted the Justice Department press release

“I consulted for OIG in PR years ago when transportation fraud was a big deal there. This scheme reflects a fraud scheme that is big but doesn’t raise huge flags for the Program based on data analysis (because dollar amounts and time frame).”

Matt’s note crystallized what I had observed for years- a significant flaw in the approach toward fraud reduction. This has nothing to do with Matt personally, who is a passionate and knowledgeable about fraud. It has everything to do with how we allocate scarce resources to the problem

Authorities know, as Matt says, that there are many frauds that are ignored because they fall beneath a threshold of amount stolen. This tells us a number of things:

Many cases are left at the side of the road because of limited resources for investigation and prosecution. On the surface, it makes more sense to pursue larger cases because the admittedly scarce resources may return more to taxpayers prosecuting a larger case.

The investigate-triage-prosecute approach, which is the primary, if not sole method of attempting to reduce fraud may in fact, cost more. While ‘building a case’ against a perpetrator, the fraud continues. The fruits of these criminal activities are not kept in money market accounts, but rather spent on Ferraris, vacations, strip clubs, offshore real estate, and other indulgences that will never be recovered. According to a friend and former DOJ investigator, the recovery rate in these cases is 10%-15%. With the recovery rate and the cost of investigation and prosecution (in excess of $100K) cases have to be larger in order to make economic sense to pursue them. 

We have been told that “predictive modeling” is the answer. In truth, its value is in finding committed and paid fraud faster than it otherwise might be identified. Fraud is about human behavior, and healthcare is complex. Predicting fraud in the future is a fool’s errand, yet it is used to justify the cost of such efforts.

Investigation and prosecution are not the problem; the problem is that they are seen as sole approach to the large issue of health insurance fraud. The frauds that are left to metastasize are often preventable and enabled by gaping flaws in the claim process and in oversight. And the measurement of this approach is misleading. Increasing recoveries by 10% over a previous year may sound like a success, but if the known fraud is up 20% over the prior year, it is losing ground. If an Attorney General said that his or her office increased murder convictions by 10%, while the murder rate rose by 25%, we wouldn’t be too happy. Since anti-fraud efforts are measured by the recovery haul compared to prior years, and specious measures of prevention, waiting for the fraud to grow yields a larger harvest, if it is recovered.

Those who are in charge of health plans, and more importantly those who pay the bills, need to insist on a change in the attack plan against fraud. Our agencies tell us they cannot address the many cases of fraud and have to triage the cases they pursue, yet nothing is done about stopping preventable frauds and directing law enforcement to more complex cases.

Enforcement-first-and-only has not and does not work. It must be married to real methods of prevention, and not just ‘preventing’ future claims from a felon. Preventive measures would stop those smaller cases from occurring and are not implemented. If our health plans, overseers, legislators, and governments do not act to prevent frauds, the trajectory of cost increases, and the drain on public and private finances will continue. We cannot afford to read about multi-million-dollar frauds that could have been stopped long before they reached that level. 

Matt wrote to me that “there are some legal issues that you seem to ignore. If you would like to make real change, you may want to understand the intricacies of health care fraud and how they impact the overall fraud investigation model.” He is correct; I am not an attorney. But I do know that the ‘overall fraud investigation model’ is what is says it is and has no provisions for prevention, with billions stolen because the fraud doesn't rise to a level of prosecution. Also, using somebody else’s credentials to get paid for a healthcare claim is not only flat-out wrong, but it is readily preventable  And when it comes to reducing the level of  fraud, this overall fraud investigation model is not working.