While most insurance claims are legitimate, studies indicate that 10% or more of all property/casualty insurance claims are fraudulent.
In the workers’ compensation industry, combatting fraud can seem like a game of Whack-A-Mole. When certain schemes and scenarios are addressed, another pops up elsewhere, costing insurers and employers more than $7 billion per year, according the National Insurance Crime Bureau.
Fraudsters have become more sophisticated and brazen in recent years. One example is with medical provider fraud, which occurs when a doctor, hospital or other caregiver attempts to profit off the workers’ compensation system. According to the State of California’s Department of Industrial Relations, medical provider fraud can include schemes and scenarios like:
- Fraudulent Billing and Billing Codes. The medical provider bills for visits or services that never occurred, billing both the workers’ comp payor and the employee’s health insurance for the same services, double-billing, billing separately for claims that are normally covered by a single fee, or using an incorrect billing code in order to charge more.
- Unnecessary Treatments. The medical provider performs unnecessary treatments, examinations or procedures in order to profit from them.
- Illegal Kickbacks. Working with other providers and receiving undisclosed payments or other benefits for making a referral.
- Soliciting. Working with runners, cappers or steerers to solicit or obtain injured workers for the medical provider.
- Pharmaceuticals and Medical Equipment. Pharmacies providing generic drugs and billing for brand-name prescriptions, billing for medical equipment that was never dispensed, or selling used medical equipment as new in order to upcharge.
While single-providers can commit fraud, medical provider fraud often comes from organized crime rings that result in multimillion-dollar schemes. In February, for example, a group of marketers, doctors, lawyers and medical service providers pleaded guilty – with some sentenced to prison – to a $200 million scheme that targeted seasonal, migrant workers in California. For years, the San Diego-based fraud ring cheated the state’s workers’ comp system and private insurance by subjecting patients to “unnecessary, and sometimes painful, medical procedures.”
Another recent example of medical provider fraud occurred at the beginning of 2018, when a former hospital owner was sentenced after being caught orchestrating a 15-year-long scheme that involved doctors and other medical professionals, resulting in $40 million in illegal kickbacks for spinal surgery referrals. The scheme, which included the sale of medical devices implanted in patients during the surgeries, led to more than $500 million in fraudulent bills that were paid by the California workers’ compensation system.
Upon sifting through the patterns, it’s easy to see plots such as these are not isolated and have set a precedence for others looking to defraud the workers’ compensation insurance system.
Thanks to years of data, new technologies and anti-fraud programs, carriers can now shed light on — and help prevent — these organized schemes.
In this ongoing game of Whack-A-Mole, it’s important to keep a keen eye out for red flags to protect the insured and continue to provide the quality services that injured workers need.
All fraud is unethical, illegal and costly to all, and any suspicions of potentially fraudulent activity should be reported immediately to the appropriate authorities.
By being able to recognize some of the most common indicators of medical provider fraud, stakeholders including agents, carriers and policyholders can help reduce the likelihood of it happening.
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