Diagnosing Deception: Forensic Professional’s Role in Identifying Healthcare Fraud

When a medical professional knowingly, deliberately, and wilfully makes a fraudulent statement or claim, it is considered healthcare fraud.

Dear Readers, welcome back to another #ForensicForesight article!

The procurement process as a potential avenue for fraud was discussed in the previous article, highlighting the role of forensic accounting in investigating such malpractices.

Check out the article here for a quick recap!

Turning our attention to the healthcare sector in this article, we will interpret the components of the healthcare sector, which is prone to fraud and how forensic accounting/ Fraud Examination comes into play.

Well-being or Wealth?

Consider these news snippets:

An allergy clinic administers patients to self-administer injections at home but fraudulently bills it as in-clinic services.

A physician bills for patient consultations and treatments supposedly conducted in their Mumbai clinic while they are actually vacationing around.

A high-profile case where the company falsely claims to have revolutionised blood testing, misleading investors, patients, and the medical community.

A COVID-19 testing centre charges for rapid tests but provides a reused test kit, fraudulently billing patients and compromising public safety.

All the above cases illustrate a disturbing trend in the healthcare industry where profit is prioritised over patient well-being. Healthcare is a critical industry as it directly impacts people’s welfare. Even though any malpractice is crippled down to a financial impact and is a point of discussion here, it poses a greater risk to human beings. Therefore, everyone is impacted by healthcare fraud, resulting in losses totalling tens of billions of dollars annually for individuals and corporations.

When a medical professional knowingly, deliberately, and wilfully makes a fraudulent statement or claim, it is considered healthcare fraud.

Medical professionals, patients, and other individuals who purposefully mislead the healthcare system in order to obtain unauthorised benefits or payments are all capable of committing healthcare fraud. According to #ACFE, the most common fraud is intentionally omitting information necessary to calculate benefits, making a false statement, or misrepresenting information. It is important to remember that some of the schemes may overlap with insurance fraud, which will be a topic for another discussion.

Some of the common areas prone to fraud in the healthcare industry are:

1. Billing and Coding
2. Prescription and medications
3. Patient information management
4. Professional and provider management
5. Medical products and services

Fraud lurks in each of these areas in different forms, affecting both the industry and the patients. The following are some of them-

The 5 Common Healthcare Fraud Schemes

1. Billing and Coding Manipulation- Segmented Billing: Charging each step of a procedure as if it were a standalone service to inflate the bill.- Elevated Service Codes: Billing for more complex services than those performed, thereby unjustly increasing reimbursement. This is also called as upcoding.- Duplicate Claims: Issuing several claims for a single treatment in an attempt to be paid multiple times for the same service.- Invented Charges: Creating false claims for medical services or supplies never provided to the patient.- Service Not Rendered: Providers bill for full service when only a partial service was performed or none at all.
2. Prescription and Medication Fraud- Prescription Harvesting: Patients systematically acquire multiple prescriptions from various doctors, a practice particularly prevalent with controlled substances.- Prescription Fabrication: Forging documents to obtain medications not prescribed by a healthcare provider.- Medication Misdirection: Diverting prescription drugs for illegal sale or personal use, diverging from the intended medical purpose.
3. Insurance and Patient Information Misuse- Insurance Information Misuse: Patients fraudulently allow or use someone else's insurance information to receive healthcare services.- Misleading Promotions: Duping individuals into revealing personal insurance details for fraudulent schemes or identity theft.
4. Provider and Professional Misconduct- Counterfeit Professionals: Individuals without proper credentials posing as healthcare providers to bill for services.- Kickback Schemes: Receiving or paying for referrals skews medical judgment and violates patient trust.- Excessive Services: Providing and billing for unnecessary medical services to generate additional revenue.
5. Products and Services Overcharging- Equipment Overbilling: Charging for more expensive equipment or billing for medical equipment that was never provided.- Cost Inflation: Artificially increasing the price of drugs and medical devices to maximise insurance payments.

Now, let us understand the impact of healthcare fraud through a real case!

Case Example: -

Two whistleblower physicians brought forth allegations against a major hospital chain and a medical staffing company.

Such practices align with the "Upcoding and Unnecessary Services" type of healthcare fraud. This involves billing for a higher level of service than provided or billing for services that are not medically necessary — effectively inflating healthcare costs at the expense of public payers (health insurance companies).

This scenario serves as a stark example of how some healthcare entities may put profit over patients, misusing resources and undermining the integrity of the healthcare system. It underscores the importance of diligent oversight and the need for forensic accounting in healthcare to detect and prevent such fraudulent activities.

On that note, let us encapsulate the ways in which forensic professionals and Fraud Examiners detect healthcare fraud.

7 Ways Forensic Professionals Identify Healthcare Frauds

1.     Analysis of Claims Data

2.     Quantification of Damages

3.     Statistical Sampling of Electronic Health Records (EHR)

4.     Regulatory Compliance Review

5.     Utilisation Review

6.     Comparative Billing Report Analysis

7.     Vendor/Provider Review

In the case we discussed above regarding upcoding, forensic professionals scrutinise large volumes of claims data to identify any unusual patterns or inconsistencies that may indicate fraudulent activities, which may indicate upcoding or billing for unneeded services. They assist in calculating the financial impact of fraud, which is essential in both prosecuting and defending healthcare fraud cases.

These professionals use statistical methods to select a valid random sample of patient records and billing data, allowing for a manageable yet representative analysis of potentially fraudulent activities. This is particularly useful in patient information misuse fraud. They extrapolate the findings from the sampled data to the larger dataset, providing a broader view of the extent of the suspected fraud. Further, the frequency or patterns of specific procedures or services billed can reveal any underutilisation or overutilisation. Through this method, kickback schemes between employees and providers can also be detected.

Having understood the significance of forensic accounting in healthcare sector frauds, we will discover more fraud schemes and recognise the impact of forensic accounting in each of them in the forthcoming articles.

Keep checking this space!

The previous articles in our #ForensicForesight series are in the following links!

1. Starting a Forensic Accounting Practice - How to Succeed in the Field
2. Exploring the Emerging Practice: Fraud Risk Assessment in Forensics
3. Extending the Reach: CAs, CMAs, and CSs brought under the ambit of PMLA reporting entities.
4. Building a Robust Fraud Risk Assessment Framework: Best Practices and Tips
5. Uncovering Deception: The Emerging Role of Detective Forensic Accounting
6. Building the blueprint: planning a forensic engagement
7. Forensic Accounting Engagements: Exploring Standards for Comprehensive Planning
8. Piecing the Puzzle: The Art of Evidence Collection in Forensic Accounting
9. From Pieces to Patterns: The Intricacies of Evidence Analysis in Forensic Accounting - I
10. From Pieces to Patterns: The Intricacies of Evidence Analysis in Forensic Accounting - II
11. Unmasking Deception: The Interplay of Human Behaviour and Forensic Accounting
12. Tracing the Trail: The Role of Forensic Accounting in Money Laundering
13. Tracing the Trail: The Role of Forensic Accounting in Money Laundering – II
14. Procurement Pitfalls: How Forensic Accounting Exposes Deceptive Schemes

About the Author

Dr. (CA) Durgesh Pandey

Durgesh is a highly accomplished forensic accounting and fraud investigation professional. He holds the distinction of being the first PhD in Forensic Accounting from the National Forensic Sciences University (NFSU), Gandhinagar, an Institute of National Importance under the Ministry of Home Affairs, Government of India.

He has trained thousands of professionals and law enforcement officials on financial crime investigation.  He is passionate towards research/teaching and associated with NFSU as professor of practice. He regularly speaks and publishes internationally.