Verizon Fraud Detection Aimed at Government, Private Health Insurers

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NEW YORK―To help governmental agencies and private health insurers better manage fraudulent claims, Verizon has developed a new technology platform that upends an older model of fraud detection.

Verizon’s namesake Fraud Management for Healthcare platform, announced earlier this week, uses predictive modeling and other analytics capabilities to examine health care payment requests—before they’re paid. This is different from the more traditional, albeit reactionary, “pay and chase method” whereby healthcare claims are received and processed for payment and then checked for fraud.

In the “pay and chase model” once payment is made, data is dropped into a data warehouse where data mining is performed to identify potentially improper payments.

It’s only after a suspected fraud is detected—and a check has already been cut—that payers go after the payees to get their funds back. It is, according to Verizon, a costly and time consuming approach—particularly considering legal and administrative fees—where few dollars are recovered.

“The current post-paid model used for health care fraud programs is highly inefficient and unsustainable,” said Nancy Fabozzi, senior industry analyst – health care and life sciences IT, Frost & Sullivan.  “Verizon’s use of advanced software technology to evaluate and process medical claims prior to payment is indicative of the future direction of health care fraud prevention.”

Verizon’s Fraud Management for Healthcare platform works by bringing together near real time data analytics and predictive modeling--along with the ability to score transactions—to catch potentially fraudulent claims. An integrated case management module with workflow capabilities routes suspicious transactions to case managers, so that they can look into any issues prior to the claim moving forward in the payment process.

Predictive modeling is commonly used in the financial services and telecommunications industry to monitor huge volumes of information. These methods use advanced algorithms and analytics, including link, behavioral and statistical analysis. The Verizon Fraud Management for Healthcare platform, which also uses advanced analytics, is a customized version of the software platform Verizon uses in-house for its own fraud prevention efforts, according to the company. The internal platform processes more than 20 billion records a day, including more than 700 million call records.

The Fraud Management for Healthcare platform comes at a good time. With the Department of Health and Human Services’ Accountable Care Organization standards calling for more efficient healthcare at a lower cost—which means, in part, vetting out graft--and the Department of Justice partnered up with Health and Human Services (HHS) in a joint Medicare fraud strike force, healthcare fraud is under a magnifying glass.

As well it should be. According to HHS, in 2009—the most recent year for which statistics are available—national health expenditures totaled $2.5 trillion, representing 17.6 percent of the U.S. gross domestic product. Of that amount, it’s estimated that fraud accounts for as much as $260 billion, or at least 10 percent of the annual U.S. healthcare expense.

Big government health programs–Medicare and Medicaid–are often the biggest targets of healthcare fraud. According to the FBI, healthcare fraud schemes come in all forms—fraudulent billings, medically unnecessary services or prescriptions, kickbacks, duplicate claims—and schemes target large healthcare programs, both public and private.

(Under the FBI HEAT initiative with HHS, senior Justice, FBI and HHS officials are focusing their efforts on reducing Medicare and Medicaid fraud using a data-driven approach to identify unexplained billing patterns by healthcare providers, and then investigate those providers. As of 2010, six hundred defendants have been charged).

The Verizon Fraud Management for Healthcare platform is designed for federal programs such as Medicare and military health, as well as state programs like Medicaid and Child Health. It’s also designed for commercial health insurers across all lines of business.

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