Dr Simon Peck
In “Misconduct health insurance fraud des matter” we discussed the differences between various kinds of FWA (Fraud Waste and Abuse) in Health Insurance. We looked at three case studies – one involving criminal conduct (Patterson) and two others where there was misconduct but no crime. We noted that from a legal perspective, the distinction between criminal and non-criminal is important. It matters both for public perception and public protection, as criminal behaviour often leads to tangible physical harm.
Despite its legal importance, the distinction matters less to an insurance payer. The reason is twofold: firstly, Fraud and Crime only account for around a small percentage of total FWA, and secondly, Fraud and Crime are much harder to prove than misconduct. Given the smaller percentage of Fraud and the difficulty in proving it, it’s often better from an economic perspective to focus on non-criminal conduct in terms of prevention and recovery.
In this article, we will discuss different ways for an insurance company / public health service to address the issue of recovering and preventing damages arising from non-criminal FWA (i.e., misconduct).
Traditional approach taught in fraud courses centres around triple-hammer remedies of civil and criminal sanctions, combined with regulatory/disciplinary action. Let us examine each of the three options in turn.
Traditional Approach: Criminal, Civil and Regulatory Remedies
Option 1: Criminal Law
Criminal cases are hard cases. A successful criminal prosecution can support FWA prevention and recovery efforts by insurance companies. The threat of a criminal case is a powerful deterrent against individual wrong-doing. Furthermore, medical malpractice cases are often public and this publicity also acts as a deterrent against future criminal behaviour.
However, the preparation of a criminal case is arduous. Failure to gather and store evidence in compliance with legislature (Criminal Procedure and Investigations Act, Regulation of Investigatory Powers Act and Police and Criminal Evidence Acts, etc…) can lose a case.
In most legal systems, a criminal case needs to be proven against the defendant “beyond reasonable doubt”. The origins of this concept go back to ancient history – for example Aristotle in his Problemata declared as follows:
“[…], anyone of us would prefer to pass a sentence acquitting a wrong-doer rather than condemn a guilty one who is innocent, in the case, for example, of a man being accused of enslavement or murder. For we should prefer to acquit either of such persons, though the charges brought against them by their accuser were true, rather than condemn them if they were untrue; for when any doubt is entertained, the less grave error ought to be preferred; it is a serious matter to decide that a slave is free, yet it is much more serious to convict a freeman of being a slave.” https://www.google.co.uk/books/edition/Delphi_Complete_Works_of_Aristotle_Illus/NWkbAgAAQBAJ
We could somewhat flippantly characterise criminal standard of proof as a mechanism to prevent false positives in law, which is fair: criminal penalties are severe and may involve loss of liberty.
Criminal Remedy – Pros:
- Criminal convictions have a significant deterrent effect
- Hard convictions can strengthen subsequent civil cases.
- Cases may set a legal precedent.
Criminal Remedy – Cons:
- High burden of proof
- Significant investment in case preparation
- It may take years to get a case into court
- Cases must be understandable to a jury which can be very difficult with complex technical issues.
Option 2: Civil Law
Another legal remedy is civil litigation. Civil cases only need to be proven on the balance of probabilities and the standard for collection and admissibility of evidence is lower.
But litigation can be costly – just to file a claim in the high court costs £10,000. And that is only the price of getting your foot in the door; solicitors’ and barristers’ fees can run into hundreds of thousands of pounds. Whenever I filed a case, I would typically ask for a contingency fund of £250,000 to cover lawyers’ charges.
There is a small claims track but that can only be used for low value claims. The administrative costs quickly add up though and hence insurers rarely make use of this option.
In selected cases, I am a fan of targeted civil litigation. However, insurance companies are often quite cautious about going to court. They are understandably worried about the real possibility of losing as well as the associated reputational risk. I sometimes feel the risk is overstated as long as investigative teams do their work carefully and only put forward cases that have a high chance of success. In my experience, most providers who have behaved badly do not want their misconduct made public and they tend to settle out of court. But there is no that doubt litigation even in the best prepared cases can fail.
Civil Remedy – Pros:
- Lower standard of proof potentially increases the likelihood of a successful claim
- Targeted litigation can be effective as a deterrent
- It is possible to sue for civil fraud which is a half-way house between a civil and criminal case.
Civil Remedy – Cons:
- High cost of civil litigation
- Risk of adverse publicity
Option 3: Disciplinary/Regularly Sanctions (Non-legal)
Disciplinary and regulatory sanctions can be useful. Medical bodies wield considerable power and can censure and discipline practitioners. The threat of withholding a practitioner’s medical license is powerful and at least in principle should act as a deterrent. However, regulation in the UK and in many parts of the world is inconsistent and sometimes ineffective. Where there is a risk to patient safety, a regulatory referral is of course essential. Outside of cases involving patient safety, regulatory and disciplinary sanctions can often not be consistently relied on when looking to prevent misconduct or recover damages.
Regulatory Remedy – Pros:
- Low cost compared with legal remedies
- Can be effective in patient-safety cases
Regulatory Remedy – Cons:
- Medical bodies move slowly, and cases can take years
- Regulation can be inconsistent and ineffective
The Power of Soft Power
As discussed in previous Kirontech bulletins, most of the waste in FWA sits in high-volume, low-value claims. None of the three approaches described above are well suited to recovering these kinds of claims. Invoking the legal or regulatory system of the medical profession in such cases is like using a sledgehammer to crack a nut. They are also often far from optimal in terms of cost.
We therefore need a way of tackling waste that doesn’t involve either criminal prosecutions (high standard of proof and low prima facie chance of success), or civil prosecutions (high cost of litigation and therefore often uneconomical).
Except for the most serious cases, my personal approach in dealing with FWA was to look at a wide range of softer options as a first response. I used these strategies for two decades to significant effect:
Focus on prepayment controls
It is far easier to stop a payment than to recover money after the event. That is why all payors should have proper financial controls in place. However, standard controls only stop a limited range of losses. To improve claim integrity, a rules engine or intelligent IT system can be used at pre-payment stage to stop losses occurring. As an example, for many years, I programmed a rules engine with “impossible combinations” of services for unbundling (see Case Study #2 in Kirontech Bulletin 19 Jan 2022 ). The resulting algorithms saved millions per annum over two decades. This was far more effective than dealing with individual billing episodes could ever have been. As new combinations were discovered, I would often not seek to recover the money in the individual cases but instead added those cases to the rules so they can be used for prevention at prepayment stage.
Clarify terms of business/contracts
Where there are grey areas and there is the possibility of genuine misunderstanding, the most effective solution may be to clarify the rules. To take a common example, there is little point in arguing whether a CT of the abdomen and pelvis is a one- or two-part CT scan if your terms of business are vague as to the meaning of the term “part”. Unclear terms of business open the door to both genuine and contrived misunderstandings and providers will tend to interpret lack of clarity in their own interest. This can be easily dealt with by amending the contract or terms of business, giving clarity to the honest and an easy path to enforcement against the dishonest provider.
This was my starting point in all but the most egregious of cases. The power of negotiation is considerable, particularly if combined with the threat of potential sanctions or loss of business. I have persuaded many providers to amend their conduct and/or repay money just by talking to them. In fact, this was the single largest source of savings. Of course, my track record of taking out some high-profile individuals in some very public cases did me no harm. People took demands seriously because previous cases taught them that not to do so could have real consequences.
Remove repeat offenders
There are some healthcare providers with whom it is impossible to establish reasonable terms. These are the individuals who constantly seek to take advantage – as soon as one loophole is closed, they find another. They contrive misunderstandings and break agreements after a period. In my opinion the best remedy for these is to blacklist or remove them from business networks/contracts if possible. In the UK, a private company cannot be compelled to do business with a supplier and insurers can simply remove rogue providers from network meaning they are no longer eligible to receive payment. I have successfully used this strategy over two decades.
Insist on service code integrity
Clinical codes are the common language through which providers communicate the services they have provided to the payors. Accurate coding is essential both to spot patterns within the data and to correctly reimburse claims. Codes should only ever be used for the purpose set out in the standard description. Providers should never be allowed to develop idiosyncratic interpretations of codes or to contrive coding combinations to obtain reimbursement where they do not feel the current coding system reflects what they do. Where code descriptions are unclear these should be clarified. Where new services are developed, new codes should be added. In the UK this can be done through CCSD (www.ccsd.org.uk).
Do not feed the crocodiles
For many years I faced problems with providers who whilst not overtly fraudulent used unacceptable tactics to obtain additional funds, such as:
- Deliberately submitting invoices for services not covered by insurance
- Provoking conflict between customers and the insurance company
- Using the threat of adverse publicity to the insurer in order to obtain wrongful payment. Insurers traditionally fearing bad publicity rewarded such behaviour by paying the claim thus guaranteeing its’ recurrence.
When I joined the industry, appeasing such tactics was common. The strategy was like feeding crocodiles in the hope that they will go away. Needless to say, this only incentivised the behaviour. Over time we would gradually change our methods and introduce disincentives. Some of these disincentives included:
- Delaying payment
- Insisting on strict proof in every part of a claim
- Suspension of commercial relationship
- Removal of direct referrals
- Regular claim audit
- For a small number of recalcitrant offenders, insisting on a legally binding and signed statement for every patient
All insurers are familiar with Friday afternoon callers – providers who call at 5 pm on a Friday seeking authorisation for controversial or ineligible treatments over the weekend. The assumption is that the claim would be rubber stamped when it’s too late in the day to say “no”. I made a point of ensuring these callers received the same treatment as everybody else. Negative reinforcement of bad behaviour (by withholding / delaying payment) was particularly effective.
I only came to mediation late in my career. I have however found it to be an effective and low cost method. One of the happiest cases I ever dealt with was settled by mediation. I had the benefit of a truly ferocious litigator who I had been planning to use for a civil action. Mediation was suggested – we had a lovely friendly meeting with the other side and our lawyers incisive probing soon uncovered that they had no case at all at which point, the defence asked for an off the record discussion. In our 10 am meeting, we asked for 100% of the money, 100% of costs and an undertaking to behave in future. At 10:10 am, we had everything signed. By 11 am we began a very happy afternoon celebrating at the pub. One of the most attractive aspects of mediation is that once a decision is reached, the mediation agreement is legally binding.
Final Recourse: the Law
Inevitably, there will be cases where none of the above methods produce the desired result. When other methods fail, we always retain the option of falling back on the traditional remedies we discussed in the first part of this article.
In https://www.linkedin.com/pulse/fraud-its-obvious-you-know-where-look-kirontech-uk-ltd we wrote about a case study where we successfully brought a legal case against two doctors for exaggerating claims for gastroscopy. The initiative would never have been cost effective to deal with a single provider. For a larger group of providers and a recurrent problem, it worked very well.
The High Court judgement which I referenced in https://www.linkedin.com/pulse/misconduct-health-insurance-fraud-does-matter-kirontech-uk-ltd/ describes how we first put in place the groundwork, starting by informing the providers of the correct way to bill. As soon as they realised the behaviour was being noticed, most providers complied and offered voluntary repayments of the incorrect claims made. Taking legal action or using regulatory referral against few selected targets can be highly effective in sending a message to the community as a whole and indeed we saw widespread changes in behaviour.
The above are some of the tactics I have used over the years and I would be interested to hear of others – please feel free to comment at the end of this article.
In summary, Health FWA can be challenging to deal with, and the investigation team needs a wide range of options to deal with the range of problems they see on a daily basis. It is important to try and think outside of the box and not focus exclusively on the legal and regulatory remedies. Employing softer methods to start with can often yield the same (or better) result at a much lower cost. If all else fails, the legal and regulatory remedies are always available as the last resort.
Kirontech Health Insurance Platform
To help with automation of Health Insurance Claims Integrity, Kirontech Health Insurance Platform (HIP) can deal with many kinds of unwanted behaviour in medical claims, both criminal (Fraud) and non-criminal (Waste, Abuse). HIP combines a wide range of tools, including:
- Automatic encoding using Kirontech Medical NLP (Natural Language Processing)
- Peer-comparison of Costs
- Outlier analysis of Service
- Treatment Paths
Kirontech HIP makes all the above tools available to the Claims Assessors and Special Investigators as part of their decision-making process. The focus is on early detection and on-going monitoring of incorrect claims, with an extremely low incidence of False Positives. Kirontech Health Insurance Platform (HIP) is custom built to tackle Fraud, Waste and Abuse in Medical Insurance. Unlike traditional AI/ML software providers, we combine our software solution with an expert team of medical and fraud experts. Our in-house experts validate the software solutions. We work hand in hand with our customers to help them retain a competitive edge in an industry that is rapidly adopting innovative technologies.
Kirontech HIP is adopted by industry leaders in the UK and outside, and we have a proven track record of delivering value and helping identify complex cases. In addition to a comprehensive library of rule-based checks, Kirontech HIP can automatically flag claims that fit existing, wider fraud patterns. This allows claim assessors to instantly narrow down on the most relevant claims and makes sure no time is wasted.
If you would like to find out how Kirontech can help you and your insurance business tackle Fraud, Waste and Abuse, please get in touch with us.
Dr Simon Peck, Chief medical Advisor, Kirontech UK Ltd