detecting healthcare vendor fraud using data analysis

Detecting Healthcare Vendor Fraud Using Data

Analysis

April 17, 2013

Special Guest Presenter:Katrina Kiselinchev, CIA, CPA, CFE, CFF

Copyright © 2013 FraudResourceNet™ LLC


About Peter Goldmann, MSc., CFE

President and Founder of White Collar Crime 101

Publisher of White‐Collar Crime Fighter

Developer of FraudAware® Anti‐Fraud Training Monthly Columnist, The Fraud Examiner,

ACFE Newsletter

Member of Editorial Advisory Board, ACFE

Author of “Fraud in the Markets”

Explains how fraud fueled the financial crisis.


About Jim Kaplan, MSc, CIA, CFE

President and Founder of AuditNet®, the global resource for auditors

Auditor, Web Site Guru

Internet for Auditors Pioneer

Recipient of the IIA’s 2007 Bradford Cadmus Memorial Award.

Author of “The Auditor’s Guide to Internet Resources” 2nd Edition


About Katrina Kiselinchev, CPA, CIA, CFE, CFF

President of Inclusivitie, We Do “SMART”

Integration Partner with IDEA

Experience across industries, audit, fraud, and value

Achieved Value of $5+ Million & ROI of 2000+%, which

included using IDEA’s SMART Analyzer .

Adjunct Professor at Georgia State University

Specific Fraud in Fixed Asset e.g. Mischaracterized Fixed

Asset v. Expense to Increase Bottom Line.


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Disclaimers

5

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Learning Objectives

6

Who are the Most Common Dishonest Healthcare Providers

New Fraud Risks Under Obamacare

Case Studies: Ways Vendors Rip Off Hospitals, Clinics and Other Providers

How Insiders Collude with Vendors to Embezzle Funds, Divert Inventory and Steal Confidential Medical Data

Red Flags of Healthcare Billing Schemes, Sham Vendor Frauds, Drug Diversion Schemes and Other Hugely Costly Scams

Proven Data Analytics for Detecting Indicators of Healthcare Fraud


Agenda

Introduction

The Auditor’s Role

Fraud State of the Union

Most Common Dishonest Healthcare Providers

IMA Bleeding Company Case

Planning, Data Gathering & Software Introduction

Discovery with DA: Is There Fraud at IMA Bleeding

Red Flag Detection & Collusion

Finding Healthcare Fraud & Next Steps

New Fraud Risks Under ObamaCare

7


The Auditor’s Role

IPPF Standard 1210.A3

Internal auditors must have sufficient knowledge of…available technology

based audit techniques to perform their assigned work


IIA Guidance – GTAG 13

Internal auditors require appropriate skills

and should use available technological

tools to help them maintain a successful

fraud management program that covers

prevention, detection, and investigation.

As such, all audit professionals — not just

IT audit specialists — are expected to be

increasingly proficient in areas such as

data analysis and the use of technology to

help them meet the demands of the job.


Professional Guidance



Source: 2012 ACFE Report to the Nations



Source: 2012 ACFE Report to the Nations


Healthcare Overview

The prevention, treatment, and management of

illness and the preservation of mental and physical

well‐being through the services offered by the

medical and allied health professions.


Polling Question 1

Frequency of Healthcare Cases in the Latest ACFE “Report to the Nation”

A. 6%

B. 30%

C. 15%

D. 2%


Most Common Dishonest Providers

Durable Medical Equipment (DME)

Pharmaceutical Companies

Third Party Billing Companies

Ambulance Service Providers

Diagnostic Laboratories

Organized Crime

Pharmacies

MD’s and other care providers


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Large Amounts of Data Identify Red Flags Faster Increased Coverage Determine Trends Continuous Analysis Process Improvement

Data Analytics for Fraud:Tools You Can Use

Small Amounts of Data Delay in Identifying Red Flags Decreased Coverage Harder to ID Trends

Data Analytics Traditional Auditing

Show First View of IDEA


Healthcare Fraud: The Big Picture

Healthcare Fraud ranges between $125 billion and $175 billion annually in Healthcare

(Thomson Reuters).

Every $2 million invested in fighting health‐care fraud returns $17.3 million in recoveries, court‐ordered

judgments, plus bogus claims that weren’t paid and other anti‐fraud savings. (National Health Care Anti‐Fraud Association,

2008) Source: www.fbi.gov


Vendor Fraud SchemesReminding Yourself What Exists

Bid Rigging – A commercial contract is promised to one party even though for the sake of appearance several other parties involved.

Price Fixing ‐ agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price to control pricing.

Market Division ‐ Competitors divide markets among themselves. In such schemes, competing firms allocate specific customers or types of customers, products, or territories among themselves.

Vendor Masking ‐ tricks e.g. shell companies to hide their true identity.

Inside Job ‐ current or former employees collude with vendor to approve and/or pay overstated or false invoices for personal gain.

False Claims – billing for more expensive equipment and billing for supplies never received


Bribery – involves bribes either directly or indirectly e.g. masking through classification type in order to gain service / business. Corruption PerceptionIndexes are good source for countries.

Kickbacks – typically external sources provide kickback for selection of services e.g. kickback.

Vendor Fraud SchemesReminding Yourself What Exists


Flying Under the Radar ‐ criminals avoid detection by using “proven”

techniques for blending in with legitimate invoices, vendors and payments.

Organized Crime Billing Schemes ‐ Sophisticated groups of criminals take a savvy, organized approach to defrauding your company. Medicare Examples of Increased Fictitious Companies

Health care fraud, waste and abuse

add roughly 3‐10 percent to all

healthcare spending.

ABC News Video

Healthcare Vendor Fraud Schemes


Healthcare Vendor Fraud Schemes

Provider Utilization Rates > Peers

Unlikely or Unrelated Procedures

Above Average Patient Volume and/or Procedures

Unbundling Procedures for Billing for + Reimbursement

Patient Name Does Not Equal Insured’s Name


Case Study: IMA BLEEDING

Initial Contact:

IMA Bleeding Co. gets an employee tip that they should look at two vendors that recently got approved for Medicare Billing. The tipster states there is massive overbilling going on for non‐eligible expenses.

“Concerns about Unnecessary Diagnostic Tests & Kickbacks”

“We Need a Data Analysis Expert… .. Massive Data”


Polling Question #2

For Every $2 Million Invested in Fighting Healthcare Fraud, How Much is Estimated to Be Returned?

A. $17 million

B. $68 billion

C. $5 Million

D. $100K

23


IMA Bleeding Co

No Pre‐Screening of New Co. Existence for Medicare Billing

No Comparison of Vendor Address v. Employees

No Comparison of Managed Care Rates v. Billings

No Comparison of Budget v. Spend

.


Software Overview & Introduction

Set Working Folder

Import Data

Check Control Totals


Client Communication:Planning for Healthcare Fraud

Walk‐through of Entity Approvals, Contracts, Rates, and Service Types

Procure‐to‐Pay Cycle

Complete Audit Plan with Data Analysis Incorporated

Include Different Types Alongside Consideration of Fraud

Comparisons to Similar Services & Pricing


Data Gathering for Data Analysis

Request All Meta Data Fields & FilesBillings, Employees, Budgets, & Rates

Microsoft Excel 97-2003 Worksheet


Polling Question 3

What Are Three Steps to Start Data Analysis?

A. Set Working Folder, Import, Check Control Totals

B. Set Working Folder

C. Set Working Folder, Import, & Begin Tests

D. Import & Begin Tests


Discovery with Data Analysis:Is There Fraud at IMA?

Initial Audits to Perform:

Vendor Locations

Address v. Employee

Stripping Address

Contracts:

Billings v Rates

Billings v Patients

Billings v Budgets

Duplicates


Discovery with DA: Spend

Audits to Perform:

Vendor Address Match

Summarize by Billings

Strip Addresses in Both Files

Join Files by Address (c)Red Flag #1: Three Vendors Match Employee Addresses


Polling Question 4

Which Tests Should IMA Run Initially

to Identify Red Flags?

A. Billings v. Rates, Patients, Budgets, and Duplicates

B. Recalculate Depreciation

C. COGS Transfer to Sale

D. Only Address v. Employee


Discovery with DA: Duplicates

Red Flag #2: Numerous Duplicates, Odd Amounts & Quantities


Discovery with DA: Billings v. Rates, Patients, Budgets

Red Flag #3:Drug A Mismatch on Rates

Red Flag 4:No Match on Patient 125

Red Flag 5:Spend v. Contract Overages


Total Issues Found & Next Steps

1) Complete Summary of Data & Findingsa) Total by Each Type of Discrepancyb) Aggregate Discrepancy

2) Determine Additional Tests to Run & Perform3) Discuss Findings with Owner Initially & Recommendations4) Complete Interviews with Employees 5) Review Gaps & Control Deficiencies & Provide Recommendations 6) Recommend Management Review for Cost v Benefit & Implement ASAP7) Determine if Client has Fraud Insurance Rider. If not, recommend.8) Contact Insurance Carrier (if applicable) & Begin Claim Process.9) Contact Authorities & File Report.10) Determine if Prosecution is Viable e.g. Dollar Amount, Management, etc.11) Complete Report (See ACFE.com) 12) Complete Supporting Doc for Insurance Co. & Authorities


ObamaCare Fraud Concerns

The Obama Administration’s bonus system for insurers participating in Medicare Advantage, the private‐market alternative to the government’s traditional health insurance program for the elderly, has been criticized

by Republicans as a political giveaway and by the Government Accountability Office as illegal.

The government rates every Advantage plan from one to five stars, depending on how they perform on a range of tests including measures of patient care, what proportion of members receive flu shots, and

measures of customer satisfaction such as complaints to Medicare. More stars are better.

Since 2011, when the bonuses first became available, the average star rating for plans that offer drug coverage — the most popular type — has

increased from 3.18 to 3.66

Legitimate or Not? Manipulation to Get Bonuses…


Polling Question 5

Which of the following is/are Red Flag(s)/ Finding(s) Identified in IMA Bleeding?

A. Improper Depreciation CalculatedB. No Match On Patient 125, Duplicates, Budget & Pricing OveragesC. Terminated Employees Receiving PaychecksD. No Match on Patient 125 Only


Questions?

Any Questions?Don’t be Shy!


Thank You!

Website: http://www.fraudresourcenet.com

Jim KaplanFraudResourceNet™

800-385-1625 [email protected]

Peter GoldmannFraudResourceNet™

[email protected]

Katrina KiselinchevInclusivitie, LLC832-236-4778

[email protected]://www.inclusivitie.com


Coming Up….

Anti-Fraud Professionals’ Role in Building an Anti-Fraud Culture, April 23, 2013

Detecting, Preventing and Auditing for Fraud Using Excel, May 7, 2013.

Details at: http://www.fraudresourcenet.com

detecting healthcare vendor fraud using data analysis

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