Healthcare fraudsters do not discriminate between private and public medical insurance.  Fraudsters use similar schemes to defraud Medicare and Medicaid and private insurance companies. 

Most healthcare providers bill public and private payers.  For example, a health care provider may be billing Medicare, Medicaid and several private health plans (in-network and out-of-network).  Private insurance companies also provide insurance as Medicare Parts C and D contractors or provide Medicaid coverage in the states.

When analyzing a provider’s claims for potential fraud, each payer has to analyze only a subset of all the claims submitted by this provider.  Unfortunately, there is not a single data repository of all health care claims made by a single payer.  Such a database would be difficult to assemble and would raise very serious risks to patient privacy.

As a result, information sharing in healthcare investigations is a very important tool.  Sharing information across payers enhances their ability to connect the dots and identify fraud schemes.  Payers, whether private or public, who limit the scope of their anti-fraud information to data from their own organization or agency are fighting the battle with blinders on and tying their own hands in the battle against healthcare fraud. 

The Justice Department, HHS and private insurance companies have recognized the importance of information sharing.  On July 26, 2012, Attorney General Eric Holder, and Kathleen Sebelius, the Secretary of HHS, announced the creation of a “National Fraud Prevention Partnership” by which private insurers and the federal government would share claims data to detect and pursue health care fraud.

Private insurance companies have promoted fraud prevention and due diligence procedures to identify “bogus” entities before they even start submitting false claims.  Such efforts are well worth the expense and help to reduce private insurance losses from fraudulent claims. 

Private insurance companies try to identify the bogus providers by conducting due diligence on “risky” providers, such as new labs, pharmacies and durable medical equipment clinics.  The due diligence process will include a full background check of the provider, a physical inspection of the provider’s address to make sure it exists, and  a comparison of identifiers across claims to determine whether multiple providers are submitting claims using the same address or post office box. 

Bogus healthcare providers typically have National Provider Identifier numbers (which are usually stolen or bought on a “black” market) and purchase patient identification numbers.  In some cases, they use a fake office and/or obtain a post office box, and then start billing insurers for non-existent services and devices.

Private insurance companies also are starting to work closely with CMS to restrict recipients of Medicare Part D beneficiaries who are suspected of submitting false or wasteful prescription drug claims.  In these situations, private insurance companies refer inquiries to CMS or to Medicare Drug Integrity Contractors (MEDIC) for appropriate action. 

Private insurance proactive fraud programs rely on analysis and comparison of claim profiles.  One private insurance company was able to save $30 million in one year by following proactive fraud identification strategies. 

Fraud prevention is much more effective and cost-effective than pursuing “pay and chase” type fraud investigations. “Pay and chase” investigations recoup only about 20 cents on the dollar, while fraud prevention investigations result in dollar-for-dollar savings by avoiding improper payments.   Importantly, fraud prevention programs can remove fraudulent and harmful service providers from the healthcare system before they do more damage to public and private healthcare programs and their members.