The financial burden of fraud, wastage, abuse and irregular practices that are committed in the private healthcare sector are estimated to add as much as R22 billion per year to the overall annual cost of private healthcare in South Africa. Principal Officer of Bonitas Medical Fund, Dr Bobby Ramasia, talks about medical aid fraud, wastage and abuse and explains how sophisticated systems have been introduced by Bonitas to combat this.

Healthcare fraud is defined by the Association of Fraud Management as a “deception or misrepresentation that a person or entity makes, knowing that the misrepresentation could result in some unauthorised benefit to the individual or entity or another.” Simply put, it is when a member, administrator or healthcare provider is dishonest in order to get money to which they are not entitled. Medical aid fraud is the most complex form of financial fraud to detect, monitor and prevent.

Fraud, waste and abuse

We find that waste and abuse is far higher than fraud and is more easily quantifiable in terms of values as it’s usually a clear contravention of tariff codes or a rule that exists. Most of the common practices include: billing for services not rendered (over billing); using incorrect codes for services (at a higher tariff); waiving of deductibles and/or co-payments; billing for a non-covered service as a covered one; unnecessary or false prescribing of drugs; and corruption due to kick-backs and bribery.

Fraud, waste and abuse are categorised together but, in the event of fraud, it is harder to convict because of the burden of proof that rests with the victim in term of the Criminal Prosecution and Procedure Act.

The culprits

The culprits are not just medical practitioners, guilty parties are found all along the healthcare delivery chain – from medical practitioners through to employees, service providers and members.

There has also been an increase in collusion between members and healthcare providers in order to attain illicit financial gain from a medical aid scheme.

There has also been an increase in cash back claims; this is when members are admitted to hospital for procedures that could have been avoided in order to claim through hospital insurance products, costing medical aid schemes billions of rands each year.

However, it’s not just this collusion that results in fraud, abuse and wastage – it can also occur when there are errors at billing stage, like using incorrect tariff and ICD-10 codes.

The cost of healthcare fraud

According to global and national surveys done by various role players in the industry, such as KPMG, Ernest & Young and the Association of Certified Fraud Examiners (ACFE), the costs of healthcare fraud may range anywhere between 5% and 15% to 20% of total healthcare expenditure, depending on which survey you refer to. It’s Bonitas’ view that the cost of healthcare fraud may be up to 7% of expenditure of which the majority is waste and abuse.

Fighting fraud is one of Bonitas’ top priorities; as a result we have put a series of measures in place to ensure that the scheme is fraud resilient. We already employ an arsenal of sophisticated strategies to deal with the challenge and significant progress has been made to enhance our prevention and detection capabilities. However, as fraud, wastage and abuse becomes more prevalent and sophisticated, so must the methods we use to combat it.

IT forensic investigator

The system developed analyses a set of data by applying various algorithms over a period to identify ‘outliers’ or abnormal data compared. These outliers are then scored in terms of the probability of the data being fraudulent. For example, the system analyses all GPs claims, compares them and if one set of claims stands out in the data set it is scored according to a level of difference in the claiming pattern. The results are referred to a forensic analyst, by means of a case management system, to review these high scoring outliers.

It also contains other reporting functionalities and an analysis tool which links any aberrant anomalies and raises the red flag for the forensic analysts so they identify possible syndicated or continuous fraud waste and abuse. We investigate and act on every transgression and have increased recoveries in terms of losses. We are also able to provide better information and evidence to prosecuting authorities.

The system was only recently implemented, but initial results and indications are that levels of fraud, waste and abuse previously not identified have, and will be, identified for recoveries and or prosecution. Our predictions of a reduction in fraud of 8% therefore seem to be accurate. The system matures and improves over time as more data is collated, effectively predicting, preventing and managing fraud, waste and abuse.

We have found that the biggest single deterrent to fraud, waste and abuse is to make it known that we are actively investigating every instance that is detected or we are made aware of. Education in terms of the relationships with medical aids, their members and the healthcare providers goes a very long way in curbing the abuse of medical aid benefits and, as such, our approach in fraud management speaks to this education component in all the matters we deal with.

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