Market: Healthcare

Healthcare and rehabilitation fraud is already endemic in the USA, with estimates for the overall annual costs ranging from $60bn (£35.7bn) to $130bn. But the FBI believes this figure could be as high as $300bn and there are fears the UK could soon become prey to similar problems.

Dr Simon Peck from the Health Insurance Counter Fraud Group (HICFG), and head of provider audit and information at AXA PPP Healthcare, estimates that UK healthcare fraud could cost up to £140m. Last year, AXA PPP identified £1.8m-worth of fraudulent healthcare claims. “We don’t have the level of organised fraud that they have in the US but it is nonetheless a big problem,” he says.

The HICFG was set up following an investigation by AXA PPP in 2003 that focused on false billing by medical providers, such as hospitals, nurses, physiotherapists and doctors. Peck says the investigation revealed that upcoding, where the medical provider exaggerates the extent of the treatment they are providing, was a favourite ploy.

“For many types of conditions, there are different codes … People were abusing the codes and claiming they were carrying out more complicated procedures than they were actually doing,” he explains.

Other methods include billing for additional treatments or services that were not actually carried out and “unbundling”, where the provider bills for extra services that were actually included in the original treatment claimed for.

“They are billing for extra options that are actually part of the main operation; they are billing it as an extra. In private healthcare systems, that is one of the most common inflated insurance claims,” Peck says.

Bone of contention

The misrepresentation of treatments is another popular scam. Peck says there have been a significant number of cases where fertility clinics have misrepresented treatments. He points out that because this is not an area commonly covered by insurance policies, specialist clinics have falsely claimed for gynaecological treatments to cover the cost of a fertility course.

“It is an area of contention for a number of insurers. There is nothing wrong with having fertility treatments obviously, but if you buy a policy that doesn’t include that, it is very expensive,” he adds. “If it is not priced into the policy, then it is not fair for it to be misrepresented and claimed on insurance.”

The misrepresentation of cosmetic surgery is also causing concern. AXA PPP Healthcare recently dealt with a case where a provider claimed for the costs of necessary hernia treatments when it was actually carrying out cosmetic surgery. After noticing that the patients were all women of similar ages and with similar medical history, the insurer decided to investigate. “We discovered they were tummy tucks and the provider was subsidising the cost for the patient by billing for hernias,” he explains. “It is quite expensive, so they are able to offer the patient a cheaper price because they’re putting some of the cost through insurance.”

Peck is keen to stress that only a small proportion of the medical profession carry out such activities. But he adds: “It is a minority problem but, nevertheless, these activities do add to premiums.”

Elsewhere, fraud in the rehabilitation sector remains problematic. AXA’s technical claims director, Graham Plumb, says the exaggeration of injuries by claimants is the most common type.

“We refer someone to rehabilitation and they try to convince the rehab supplier that they are much worse than they already are,” he explains. “It has always been a problem. But in the current economic climate, the temptation is there for claimants to embellish their claims even more.”

He says that the rehabilitation sector remains largely unregulated, and believes that in some cases medical professionals may have been involved in trying to push up the value of the claim. “We have believed that the doctor hasn’t really examined the patient properly or they are working for the benefit of the claimant.”

While healthcare fraud and rehabilitation fraud is at a relatively early stage in the UK, it remains firmly entrenched in the USA. Speaking at the HICFG annual conference in Brighton, FBI supervisory special agent Larry Guerin explained that organised healthcare fraud, mainly concentrated in New York, Miami and Houston, was a “huge” problem for the USA.

Currently, the costs of US healthcare fraud are largely fuelled by bogus internet pharmacies (which supply counterfeit drugs and equipment), staged accidents by organised gangs, and home-help agencies billing for unnecessary care.

Ambulance fraud schemes, which provide unnecessary travel for mobile patients and infusion fraud, where HIV patients are given inessential or non-rendered drug infusions, are also ramping up costs.

While Peck says that some of these problems, such as bogus treatments and the supply of counterfeit drugs, were still relatively rare in the UK, he believes it might only be a matter of time before such practices become more widespread.

“Across Europe, there are problems with counterfeit drugs and prosthetic devices. They are imported from places like China and are then finding their way into the supply chain. It is our view that it could be a problem. If there are problems in other parts of Europe, it is very unlikely that we are immune to it,” he says.

Sales headache

Meanwhile, the rise of unscrupulous brokers in the private medical insurance (PMI) marketplace is causing problems for insurers. During the conference, Perfect Health’s chairman, Andrew Tripp, says that customers were being “consistently misled” when buying PMI.

He blames the complicated menu-based layout of PMI policies, which in some cases could be up to eight pages long, for confusing customers and providing opportunities for fraudsters.

“There is a tremendous opportunity for a sales person or a broker to get a quotation for an insurer, sell it as a fully comprehensive plan and in fact, underneath the mirage of all these opportunities, actually mis-sell products,” he says.

A common fraudulent tactic is ticking a reduced-cost six-week option plan on application forms, while falsely selling it to consumers as a fully comprehensive plan.

Other methods include selling products through individual sales instead of group plans to increase commission, and dissuading customers from disclosing certain medical conditions to insurers to guarantee an easy sale.

Furthermore, Tripp adds that inadequately trained intermediaries, such as former mortgage brokers unable to sell products in the wake of the credit crunch, were entering the PMI market

and creating more problems. This has now prompted the Association of Medical Insurance Intermediaries to set up a formal qualification for all association members’ from 2010 onwards.

Elsewhere, Tripp points out that fraudulent claimants were taking advantage of PMI insurers by forming bogus businesses to benefit from cheaper group premiums.

Peck warns that, while healthcare fraud has yet to reach the epic proportions of the USA, insurers need to be on their guard. He explains that the HICFG is currently developing a fraud database for health insurers to alert insurers about similar cases and raise rates of detection across the UK.

“The reason we are doing this investigation work is to protect customers’ premiums and ensure we are not in the American situation, where vast amounts are being lost. We see ourselves as pooling resources across the industry to drive out these practices.” IT