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3 keys to stopping medical provider fraud, waste, and abuse

By Ryan Cleverly  |  November 4, 2019

It’s no secret that medical fraud is a big problem, with some sources estimating the cost at more than $200 billion annually. But knowing the problem is one thing. Detecting it and doing something about it is another.

Property/casualty insurers face a particular challenge on this front, with medical provider fraud, waste, and abuse accounting for the majority of claims fraud. As many insurance special investigations units (SIUs) already struggle to prioritize resources, dealing with the unique complexities of provider fraud can be overwhelming.

There are three fundamental questions insurers face with medical provider fraud:

  • How do you find it?
  • What do you do about it?
  • Is it worth pursuing?

Fortunately, data and advanced technology offer solutions to those questions.

Overcoming difficulties in detecting medical fraud

Injury claims tend to be complex—and difficult to analyze for potential fraud—because they require a thorough understanding of procedure codes, treatments, and costs to discover aberrant medical billing. And it’s not just outright fraud you have to find but also waste (such as high frequency of diagnosis) and abuse (for example, upcoding).

The complexity in understanding medical provider fraud compared to claimant fraud is why it’s more difficult to uncover and, consequently, more prevalent.

That’s why it’s important to look at billing patterns and provider behavior. Advanced analytics applied to medical billing databases can reveal patterns of aberrant treatment and billing across a company’s entire book of claims. That way, suspicious provider behavior can be flagged for adjusters, even if they don’t have medical expertise.

Giving investigators critical direction

Detecting suspicious billing behavior is the first step. But how do you know what to do with that information? Data may identify aberrations in provider behavior, but you need actionable insights to know what to explore in the data and how to direct resources for investigative purposes.

Analytic solutions can help with these insights by detailing specific issues in billing data as well as providing direction for what to investigate. For example, reason codes can explain that a provider is billing for a high average number of modality procedures per visit. An insurer can then compare that provider with others and identify outlier trends. Those insights help determine where to direct limited SIU resources.

Knowing your exposure

Since medical provider fraud is so prevalent and complex, some insurers chalk up losses as the cost of doing business. Insurers often don’t have the time and resources to pursue every suspicious provider. Sometimes the cost of an investigation can be greater than the leakage from a fraud or abuse case.

But how do you make those determinations? How do you know exactly how much an unscrupulous provider is costing you, and when is it worth investigating?

Those decisions depend on individual insurers. But when you have the proper data and insights, you can get a clearer understanding of your exposure and make better-informed decisions on investigations. For example, medical billing data insights can show a carrier just how much a suspicious provider’s activities are costing them. Armed with that information, an insurer can prioritize exposure associated with that medical provider.

Equipping insurers to fight medical provider fraud

Medical provider fraud can be overwhelming, but it’s a problem that can’t be ignored. As fraud increases and the cost of bodily injury claims rises, insurers can’t afford to remain in the dark and let their bottom line erode.

ISO MedSentry® helps shine a bright light on medical provider fraud, waste, and abuse. The solution’s predictive analytics models and highly tuned algorithms identify suspicious billing practices early, provide reason codes to direct investigators, and offer insights on your exposure to help prioritize resources for investigations.

When equipped with the right solution, insurers can effectively fight medical provider fraud and improve their bottom line.


Ryan Cleverly is director, operations and strategy, for ISO Claims Solutions. You can contact him at Ryan.Cleverly@verisk.com.