Category Fraud/Crime

Current fraud trends within the healthcare industry

27 July 2012 Dr Jonathan Broomberg, CEO, Discovery Health

Discovery Health has released detailed information on fraud in the industry.

· White collar crime, including fraud, appears to be on the rise, both in South Africa and globally and this trend is undoubtedly impacting on South Africa’s healthcare system as well as on healthcare systems in other countries.

· International data suggest that losses to healthcare fraud and abuse may account for between 3% and 15.4% of claims paid - with an average of approximately 7%.

· There are no accurate data on the extent of healthcare fraud in South Africa. However, if we assume that international trends apply in South Africa, it is possible that fraudulent medical scheme claims account for between R3bn and R15bn annually.

· There is no doubt that fraud is one of the drivers of escalating medical scheme claim costs in South Africa, and that all stakeholders should collaborate to reduce fraud and bring the perpetrators to book.

· Our data and experience indicate that fraud is committed by a combination of medical scheme members, healthcare professionals and service providers in the healthcare industry, and brokers. There is also increasing evidence of fraudulent activity by sophisticated syndicates, both local and international, who appear to be targeting the healthcare system.

· It is important to remember that perpetrators of fraud constitute a very small minority of members, healthcare professionals, brokers, and service providers. The vast majority of scheme members and the professionals and businesses who serve and treat them are honest, hardworking and ethical. However, a small minority are tarnishing the reputation of our healthcare system and causing significant financial losses.

Discovery Health’s approach to combating fraud

· Discovery Health regards fraud as a serious, criminal offence, and adopts a zero tolerance approach in combating fraud. The main objectives of our fraud strategy are:

o To proactively prevent fraud wherever possible

o To identify all cases of fraud

o To recover funds lost to fraud for our schemes, and

o To ensure that the perpetrators are brought to book, by taking all appropriate steps such as terminating the membership of members who defraud the scheme, reporting fraudulent health professionals to their relevant professional regulatory bodies, and also reporting serious fraud cases to the South African Police Services.

· We view fraud to be a serious criminal offence, and will take all actions necessary and where appropriate to counter fraud. When fraud is identified and proven, we take a number of actions:

· We take action against first time offenders.

· We reclaim monies obtained fraudulently by members and healthcare providers, and which are owed to the medical scheme.

· We terminate memberships and payment to healthcare providers in the cases of proven fraud.

· We submit formal complaints to the Health Professions Council of South Africa (HPCSA) where appropriate – the HPCSA has jurisdiction to decide whether to dismiss or suspend a healthcare professional according to the merits of the case.

· We file formal charges of fraud where appropriate with the South African Police Services.


Discovery Health’s Fraud and Forensics Unit

· Discovery Health has a large and sophisticated Fraud and Forensics Unit, which deploys highly skilled professional investigators and analysts, as well as state-of-the-art software detection systems to identify, investigate and prosecute cases of fraud.

· Some key statistics on the Discovery Fraud and Forensics Unit:

o Our Fraud and Forensics Unit employs a team of 35 full time healthcare fraud and forensics investigators, actuaries and analysts.

o At any one time, the Discovery Health Medical Scheme has up to 2000 open cases relating to healthcare fraud.

o Discovery Health has developed a proprietary forensic software system, Informa™ which uses smart, dynamic algorithms to trawl through all our claims data on a daily basis to identify any unusual patterns and flag items for further investigations. The Informa™ system is continuously improved and updated, and has thus far identified numerous areas of fraud and abuse.

o The Informa™ system generates as many as 170 or more statistical investigations at any one time, and these lead to several hundred specific forensic investigations of possible fraud committed by members or healthcare providers being carried out on a continuous basis.

o The Fraud and Forensics Unit will collect approximately R250 million in fraud recoveries during 2012.

o Over R500 million has been recovered for the Discovery Health Medical Scheme relating to proven cases of fraud since 2009 to date.

o We project that we will recover approximately R1.4 billion for the Discovery Health Medical Scheme in the period 2013 – 2016

Examples of recent fraud cases

Fraud committed by scheme members:

· Members found to be forging and submitting claims for services ostensibly rendered by healthcare professionals, but which were never actually rendered.

· Members order high cost equipment from a supplier (e.g wheelchair or other high cost medical item), submit the claim and obtain reimbursement, but then fail to pay the supplier and do not collect the equipment.

· Members, in collusion with doctors and hospitals, submit claims for false hospital admissions, in order to benefit from claims payments.

· Members sharing their medical scheme card with non scheme members who require hospital admission or treatment by a doctor, resulting in the scheme paying for claims for non members.

Fraud committed by healthcare professionals and service providers

· Pharmacies dispensing generic medication and claiming for expensive brand name medication.

· Pharmacies selling cosmetics and other ‘front shop’ items to scheme members, and submitting claims for medicines to the scheme.

· Pharmacies selling members high cost devices, often several times per year, often surplus to their needs, and submitting claims to the medical scheme.

· Healthcare professionals and service providers submitting claims for services that have not been rendered to patients. For example, claiming for consultations when member did not attend the practice; or claiming counselling services for unconscious patients in an ICU.

· Healthcare professionals colluding with members in card sharing. Healthcare professionals agreeing to see a non scheme member and submitting a claim on another person’s membership are committing fraud.

· Dispensing doctors providing members with low cost generic medicines and claiming for higher cost non generics.

· Healthcare Professionals providing fraudulent sick notes to members as well as then claiming for a consultation from the scheme.

· Healthcare providers performing cosmetic surgery on scheme members which generally is not covered by the scheme and then claiming for some other procedure which is covered.

· Healthcare professionals fraudulently changing the diagnosis of a patient in order to access a specific benefit.

· Healthcare professionals claiming excessive or additional material and consumables, not used during a consultation or procedure.

· Dentists claiming for additional fillings or extractions not done or providing members with cosmetic gold inlays and claim for normal crowns.

· Biokineticists acting as personal trainers to healthy members in gyms and then submit claims to the scheme as if rehabilitation services were rendered to those members.

Fraud committed by individuals and syndicates:

· A syndicate was identified attempting to submit false membership applications, then submitting fraudulent claims on those memberships.

· A syndicate has been identified trying to change member or service provider bank details in order to divert claims payments to their own account.

· A syndicate has been identified, admitting healthy members to hospital, in order to benefit from “hospital cash back insurance”.

· Syndicates often collude with unscrupulous employees of healthcare funders.

· Brokers providing the scheme with false details for medical scheme membership applicants, in order to avoid waiting periods and late joiner penalties being imposed.

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