A cure for the fraud virus

Risk & Insurance, Jan, 2005 by Peter Rousmaniere

Medical provider abuse and fraud usually involve repetitions of aggressive treatment and billing. Some providers risk jail time by committing outright fraud, but probably more rake it in by going right up to the line.

Those criminal conviction body counts we read more about these days may therefore not mean a whole lot. I'd rather be told about the progress in combating aggressive behaviors, spreading and mutating like those viruses that slip undetected into your computer.

We need to attack these behaviors through stronger computer tools, which I gather are making their way into the claims payer community. But I wasn't sure I fully understood how computer detection works to combat fraud and abuse, so I asked around.

Fraudsters and abusers typically seam both auto and workers' compensation insurers. They overtreat and overbill. They concentrate on high-margin services such as physical therapy, chiropractic care, expensive testing such as MRIs, and outpatient surgery. Work injuries and auto accidents are good targets because the most frequent kinds of covered injuries use these services.

My conversations led me to suspect that many clinicians knowingly over-treat from time to time. I don't lose sleep over this. What day did you not drive over the speed limit? But maybe one out of 10 clinicians makes it a daily routine. These are the guys we really need to understand.

A veteran orthopedic practice manager shared with me his two decades of experience. "A lot of insurance people," he said, "don't seem to grasp how medical providers behave when they turn abusive. The insurers define the problem of abuse to fit how they want to run their business. Meanwhile the real drivers of excessive costs have remained pretty much untouched."

My informant believes that most orthopedic practices may actually undertreat. Many could bill more and still stay within boundaries of proper conduct. For a very small number of physicians, medicine has turned into (or was from the outset) a fig leaf covering a passion for enrichment. These doctors aggressively invest in physical therapy, MRI and ambulatory surgical centers to which they refer their own patients. They may lard their physician assistants' and administrators' wages with six-digit incentives to maximize revenue.

These guys can get through the conventional defenses of insurers, designed under the spell of what I will call the "peanut butter theory of excessive costs." The idea is that abuse is spread all over. This spread-it-thin review-and-deny method annoys the decent medical provider and gives a heads-up to the bad guy.

Rather than using the peanut butter analogy, I prefer using what I call the "virus theory of excessive medical costs." Under this theory, a large share of excessive costs stem from learned behavior, infecting a small number of providers, and spreading past defenses to other parts of the medical corpus. Providers learn from each other, or from lawyers, how it's done. As they say in medical school, "watch one, do one, teach one."

To combat these viruses the insurers need to go deep into documenting patterns of practice. Medical bill-by-bill analysis won't cut it. The fraudster's Achilles' heel is her or his overconfident, standard pattern of overtreatment, case after case, without any evidence that anyone paid attention to the singularities of each patient. Thus, systematic overtreatment leaves a telltale pattern. Find the pattern!

PETER ROUSMANIERE is a regular columnist for Risk & Insurance[R]. He can be reached at riskletters@lrp.com.