Health Care Fraud Hurts!

The Impact of Health Care Fraud, and What You Can DoTo Fight Fraud within Your Organization

February 2010

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Agenda

• Recent fraud solutions

About Alpine

• Expenditures & Trends• Health Care Fraud, Waste, and Abuse Statistics• Health Care Fraud Catalysts

State of Health Care in the U.S.

• Organizational Challenges• Addressing these Challenges

Why We Struggle With Fraud

• Fraud Data Assessment• Solutions from IBM & Memento

Alpine Can Help Jumpstart your Fraud Mitigation Programs

Summary / Q&A

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Alpine Consulting Overview

• IBM Premier Business Partner since 1996• Member, IBM WebSphere Commerce Council• Member, IBM Business Partner Council • Gartner IT Channel Vision Board• 2008 Winner of IBM’s Information Management

Solution Excellence Award (Client: Custom House)• 2009 Winner of IBM’s Customer Innovation Award

(Client: Alameda County Social Services)

Achievements, Memberships, and Awards

Information Management

e-Commerce

Technology Practices:

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Recent Fraud Mitigation Solutions

Customer Screening & Compliance

Social Services Integration – “Single View”

Medicaid Fraud

Customer Screening & Compliance

Loss Prevention & Risk Management

• Anti-Money Laundering• Inappropriate / Unlawful Relationships• Suspicious Activities

• Aggregated view of social services activity• Fraud & abuse reporting• Investigative support

• Medicaid recipient fraud• Medicaid provider fraud• Litigation support

• AML, BSA, Patriot Act Compliance• Transaction aggregation & disambiguation• Investigative support

• Insider threat / conflicts of interest / collusion• Nevada State Gaming Board compliance• Suspicious activities, customer/employee

screening

The State of Health Care in the U.S.

• More than $8,000 per citizen in the U.S.• Grew 5.7% over 2008, even though the economy shrank 1.1% (recession)• Expected growth of 4.1% through 2019.

National health care expenditures reached $2.5 trillion in 2009

• Increased enrollment due to poor economy; job losses

Medicaid spending increased 9.9% in 2009

• Without COBRA, there would be no growth in 2009• 2010 may bring negative growth as COBRA expires for 2008-9 unemployed

Growth in private health insurance premiums grew only 3.3%

• Approximately $13,000 per citizen annually

HCE expected to reach $4.5 trillion by 2019; 19.3% of GDP

Sources: Centers for Medicare & Medicaid Services (US Department of Health) “NHE Projections 2009-2010”

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Medicaid Program Woes

• State and county Medicaid programs are underfunded• Hiring freezes & furloughs are the norm• Very low morale across the board• Increased enrollment due to rough economy• Larger caseloads being handled by smaller support staffs• Longer term, “Baby Boomer” challenges loom• Higher taxes to close budget gaps

The recession is wreaking havoc

State: Medicaid Deficit ($ Millions)New York $ 548.1Illinois $ 379.3Ohio $ 281.2Pennsylvania $ 261.2New Jersey $ 241.9Texas $ 235.0California $ 203.6Wisconsin $ 200.0Massachusetts $ 197.0Florida $ 188.5

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Ripe Environment for Fraud

Opportunity Pressure

Rationalization

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Fraud, Waste, and Abuse Statistics

• $75 Billion lost to fraud in 2009• $242 for each citizen in the U.S. annually• Only $4.8 billion in fraud, waste, and abuse recovered by federal programs in 2009

At least 3% of health care expenditures are lost to fraud each year

• Fraud, Waste & Abuse losses estimated at $600-800 billion annually• 24%~32% of your health care expenditures• $7,500 – 10,000 for a family of four• Waste and abuse is essentially fraud that can’t be proven• Largely ignored as a “cost of doing business” and passed on to policyholders and taxpayers

Fraud, waste and Abuse

• Providers – 80% of fraud losses (lower frequency; higher value)• Recipients – 20% of fraud losses (high frequency; lower value)• Organized Health Care Fraud – Multi-party collusion – Losses unknown

Who commits fraud?

Sources: Coalition Against Insurance Fraud. www.insurancefraud.org.

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Fraud Opportunities“Where there’s smoke, there’s fraud”

•Fraud is considered a “cost of doing business” and is passed on to the consumer (Minimal management attention in many cases)

•Health care claims analysts/investigators are understaffed and overworked•Controls are eased to reduce service bottlenecks•Analysts don’t have time to perform full due diligence on claims•Analysts don’t have the tools or time to detect sophisticated fraud•Prosecution is difficult; requires additional resources•The average fraud scheme lasts approximately 24 months! (source: ACFE)

“Where there’s smoke, there’s fraud”

•Chronic up-coding of services•Double Billing•Claims modification until acceptance•Patient abuse & collusion

Provider Opportunities

• Identity modification & theft•Elder abuse•Unauthorized dependents•Durable medical equipment fraud

Recipient Opportunities

•Non-existent facilities & treatments• Identity theft•Prescription drug and DME diversion

Organized Health Care Fraud

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Pressure to Commit Fraud

• Struggling to support a practice/office• High debt load (education, equipment, facilities)• Reconcile treatment costs with compensation• Competitive need to provide “quality” care

Providers (80% of fraud losses)

• Sheer desperation – need medical care• Addictions• Pressure to maintain lifestyle / supplement income• Opportunistic greed

Recipients (20% of fraud losses)

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Fraud Rationalization

• “Every other provider I know is doing this”• “I’m entitled to this”• “I’m not compensated fairly”• “Just trying to meet payroll”• “That’s just the way you have to do it in this business”

Providers

• “It’s not stealing – government / big insurance companies can easily absorb the loss”

• “I don’t know how else to get the treatment I need”• “They’re not stopping me, so it must not be wrong”• “It’s a loophole”

Recipients

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Failure to fight fraud

• Considered a cost of doing business• Difficult to quantify• Perceived to negatively impact customer satisfaction• Legal risks

Fraud mitigation is not a strategic initiative

• Heavy caseload; investigator burnout• Insufficient tools, analytics, and reporting• Little incentive for performance – “We don’t need more leads”

Investigators and analysts are overloaded

• Information is not stored centrally; stored across many organizations• Claims process is complicated• Information is always in flux• HIPAA and other privacy regulations/legislation make data access difficult• Standard practice is to deny further participation; violators find it easy to re-

establish operations

Prosecution is difficult, costly, and time consuming

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Fighting Fraud Effectively

• Fraud costs must be quantified to management• Involve upper management in mitigation initiatives• Demonstrate improvement (report, measure, and benchmark)

Fraud must be a strategic initiative

• Manual investigations are not cost effective• Automate tedious/time-consuming elements of the investigation

process• Go beyond “low-hanging fruit”• Invest in tools and training – be consistent

Make analysts and investigators more efficient

• Failure to prosecute provides opportunity and rationalization • Publicize fraud prevention efforts when appropriate (deterrant)• Proper investigation tools can reduce the cost of prosecution

Commitment to fraud prosecution

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Alpine JumpstartGet Started with our Fraud Data Assessment

• Analyze data / procedures to build a fraud profile• Identify potential cases of fraud or fraud “hotspots”• Extrapolate results to estimate aggregate impact of fraud

Help Quantify the Cost / Impact of Fraud

• Understand daily activity/procedures/tools used by investigators• Identify opportunities for automation/simplification• Make recommendations for improvement

Identify Strategies/Tools to Supplement Investigator Efficiency

• What triggers a prosecution decision?• Determine “Return on Prosecution”?• Recommendations to maximize ROP

Identify Prosecution Challenges & Bottlenecks

• To strengthen fraud mitigation efforts• Procedural, technology, reporting, organizational

Provide General Recommendations

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Alpine Fraud Mitigation TechnologiesUsed within the Fraud Data Assessment

Memento Security

Full fraud solution for health care / medicaid claims

Excellent for organizations who don’t have significant case management, analytical tools, or reporting capabilities

IBM Identity Insight

Middleware solution that supports a wide variety of fraud initiatives.

Excellent for organization who already have case management, analytics, reporting, and data warehousing tools.

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Memento Security

•Intelligent grouping of “alerts” by relevance/role

•Interface and workflows that are familiar to your investigators

Integrated Case Management

•Uncover networks of organized criminals

•Visualize linkages and claims patterns

•Detect fraudulent claims before payment

Collusive Network Detection

•Reveal and characterize risky / fraudulent behavior

•Put investigator knowledge to work 24/7

Advanced Fraud Analytics

•Able to analyze 500 million transactions/day

•Less dependence on IT resources

•Able to integrate “raw” data from source systems

Innovative Data Management

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IBM Identity Insight

• Aggregates all information known about a single individual from various data sources

• Identifies relationships at up to 30 degrees of separation• Works with your existing case management, reporting/analytics tools, and/or data warehouse.

Builds the Dossier Automatically

• Duplicate records and false positives• Lack of historical information • Inability to view relationship networks

Do your Investigators Complain About:

• Originally developed to detect fraud in Las Vegas• CIA investment (In-Q-Tel) for use in National Security efforts• Acquired by IBM in 2005• Extended for use in non-government applications

Technology Background

17More info at:http://www-01.ibm.com/software/data/identity-insight-solutions/

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Case Study: Health Care Claims

Entity #2580111

Providers: 70010000ZL4550

XXXX URGENT CARE LLCXXXX URGENTCARE1735 XXXXX Ste 450 Okemos, MI 488641735 Hamilton Okemos,MI 48864Tax ID Number: 38203XXXX

HHS List: 491

XXXX URGENT CARE CENTER1735 XXXX Ste 450 Okemos,MI 48864Sanction Code: 1128a1Sanction Type: Program Related ConvictionSanction Date: 2005/11/20

Entity #3817587

DEA List: AG3117808

MELINDA SMITH1735 XXXX Unit 450 Okomos,MI 48864DEA Number: AG3XXXX08

EAS Entity #2923070

DEA List: BG7716333

AMANDA SMITH1735 XXXX Rd Okemos,MI 48864DEA Number: BG7XXX333Gender: M

A Sample “Investigative Lead”:

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Getting Started:

Fraud Data Assessment

• What we need from you:– Meet with Alpine to discuss

your needs and objectives– Verify availability of data– Define the scope of the

analysis– Execute data security and

service agreements– Transfer data to Alpine– Verify initial results– Allocate sufficient resources to

investigate leads

• What you get:– Identity Insight Intelligence

Report – Contains the results of your analysis (“leads”)

• .pdf, .xls, .mdb, or other structured format.

– Service summary – summary of findings; instructions on using the reports and tools; technical recommendations

– Tutorial on how to use the reports/tools

– Optional: Investigative support services

Summary:Fraud is more than a “cost of doing business”

• Fraud, Waste, and Abuse consume approximately 25% of health care expenditures

Fraud mitigation is a strategic initiative

• 80% of investigator time is spent searching for data• Many of these ‘searching’ processes can be automated

Fraud Investigators and Analysts Need Support

• Identification of fraud “hot spots” and trends is critical• Consolidation and resolution of data are necessary

Consistent, Aggressive Prosecution Should Be Pursued

• Our free “Fraud Data Assessment helps you quantify your fraud challenges, identify fraud hotspots, inefficiencies, and investigator needs

• Contact Alpine today to get started!

Alpine Can Help You Get Started

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Q&A / Contact Information

Thanks! Questions?

Contact Info:Corporate HQ: West Coast US:Stan Duda Earl Stevens

(224) 520-7400 (702) 688-0628

sduda@alpineinc.com estevens@alpineinc.com

Alpine Consulting Overview

• Based in Chicago, IL - Midwest focus with National reach – sales offices in UT, WI, and TX

• 60+ resources• Regional systems integrator with

focus on delivering eBusiness solutions, custom development, and systems integration for mid-market and larger companies

• Vertical expertise in Manufacturing, Retail, Distribution, Financial Services, Government, and Hospitality/Gaming.

Company Profile:

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Alpine Core Solutions

E-Commerce PortalsManaged Services

•Entity Analytics

•Information Management

•Data Quality Assessments

•Global Name Recognition

•Talend

•IBM QualityStage and DataStage

•eCommerce implementation

•eCommerce Strategy

•eCommerce Selections

•eCommerce Migrations

•B2B and B2C solutions

•Legacy integration

•Open Source eCommerce

•IBM WebSphere Commerce

•ATG

•Supplier, Partner, and Employee Portals

•Portal integrations

•Open Source Portals

•IBM WebSphere Portal

•Outsourced WebSphere managed services

•Application migrations

•Security and infrastructure assessments

•Remote managed services

•IBM AppScan

•Custom Java/J2EE development in all environments

•Custom e-commerce websites

•Web site design and customization

Information Management

Custom Development

Application Security, Assessment and DevelopmentSecurity

Accelerate ROI and extend the value of your existing IT solutions

IT Strategy, Technology/Application Selection, Interim IT ManagementCIO Services

User Interface Design, Usability, LAF Design, ADA, SEO, TrainingStrategic UI