Fraud Control - Insurance Institute of India

Dr. Nayan Shah
Definition of FRAUD
An intentional perversion of truth for the purpose of inducing
another in reliance upon it to part with some valuable thing
belonging to him, or to surrender a legal right; A false
representation of a matter of fact, whether by words or by
conduct, by false or misleading allegations, or by concealment
of that which should have been disclosed, which deceives and
is intended to deceive another so that he shall act upon it to his
legal injury.
• Fraud-
▫ Intentional deception + Misrepresentation intended
Unauthorized benefit
• Abuse▫ Charging for services that are not medically necessary, do not
conform to professionally recognized standards, or are unfairly
• Impact –
▫ 15% claim amount (Rs. 600 – 800 crores)
• Fraudulent Claim –
▫ Intention to deceive, conceal or distort relevant information
affecting benefits- derive undue benefits from Insurance
▫ Preparation of exaggerated/inflated claims/medical bills
▫ Malafide intention to induce the firm to pay more
Healthcare FRAUD
Healthcare Fraud is an intentional deception or
misrepresentation that the Individual or Entity makes
knowing that the misrepresentation could result in some
unauthorized benefit to the Individual, or the Entity or to
some other party.
Global & Indian Scenario of Healthcare
1 unit out of 7 spent goes to Fraud & Abuse.
16 billion USD in Medicare in 2008 – estimate
About 36 billion losses to U.S Health Insurance per year
In India, estimated loss is 1000 crores & increasing
Categories of Perpetrators of FRAUD
 Consumer
 Sales Distribution Channel
 Providers
 TPAs
 Insurers
Govt. mass policies- anew dimension of
Consumer Related FRAUDS & ABUSES
Eligibility Frauds
 Age, Occupation, sports habits, life style
 Enrollment Details
 Suppression of material facts and previous illnesses
 Suppression of Chronic Ailment Information
 Health coverage of dependants from other sources
Pre Policy Checkups
 Impersonation
 Influencing the diagnostic center
Over insurance
Consumer Related FRAUDS & ABUSES
Travel Health
 Suppression of Medical Details
Frauds at the time of Claims
 Duplicate Filing
 False bill preparation
 Collusion with Providers
 Impersonation
Bogus groups for Group Discount (non-homogenous groups)
Bogus group members in Employer funded groups
Non existent employee in Employer’s list for Claims purposes
Distributor Channel Related FRAUDS
 Data Fudging
 End of Policy Reports to Insurer i.e. IBNRs
 Underwriting guidance
 Pre policy checkup fabrication
 Inappropriate information about Policy
 Misrepresentation for higher commission
 Pocketing of money without passing it on to Insurer
 Collusion with Providers
Provider Related FRAUDS & Abuses
 Wrong Billing
 Inflated Billing
 Billing for Services not rendered
 Fraudulent timings of admission – 24 hrs hospitalization
 Admission without Diagnosis
 Planned admissions classified as emergency admissions
 Length of Stay - overutilisation
 Admission for Investigations
Provider Related FRAUDS
 Wrong surgical categories & surgical details
 Overcharging for Consumables
 Pharmacy billing – Generics U1 branded
 Doctor’s visits
 Class of Admission – Single, Sharing, General
 Cross references not warranted
 Over Investigations
 Life Support system usage
 Waiver of Copays
 Kickbacks from Provider Network
 Collusion with Network for Inflated / Wrong Bills
 Rewards in the garb of early payments / release of payments to
Providers / Consumers
 Directing the Consumer to a colluded Provider
 TPA Employee colluding with Fraudsters
Insurer Related FRAUDS
 Reluctance for giving senior’s policy, renewal after claims
 Non registration of claims toward the end of tenure
 Reluctance to pass on appropriate data to competition
 Termination to loss making policies
 Subjecting TPAs to exercise uncalled for force on
providers without changing the products.
Other FRAUDS Globally Observed
 Primary Care – Pharmacy, Diagnostic Centers
 Coding – Bundling & Unbundling
 Higher Codes
 Viatical Frauds
Dealing with Consumer FRAUDS
 Eligibility Check criterias
 Teleinterviewing
 Tele Underwriting
 HRA Tools for Corporates
 Fraud Detection Software
 Investigations
 Canceling the Policy
 Control on Diagnostic Centers
Dealing with Distribution Channel FRAUDS
 MIS Reports
 Business Reviews
 Profitability Reviews
 License Suspension / Cancellation
Dealing with Provider FRAUDS
 Cost Control Techniques & Tools
 Utilization Reviews & Medical Audits
 Care Pathways
 Preferred Networks & Network Contracts
 DRG based Payments
 Investigators Services
 Creation of awareness amongst Providers
 Legal Remedies
 Blacklist of errant providers & publishing the same
Dealing with TPA FRAUDS
Termination of License
Terminate the contract
Levy Penalties
Cancellation of contract
Complaints to Insurers & Regulators
Complaints to IRDA
Complaints to Insurers
Consumer Forums & Judiciary
Press & Media Coverage
Dealing with Insurer FRAUDS
 Complaints to Regulators
 Media exposure of errant insurers
 Complaints to Consumer forums, Judiciary
. Mass policies-Govt
• Enrollment level frauds
• Distributor frauds
• Network Hospital frauds
. Mediclaim journey over years
• Transition from indemnity to managed
• Distributor channel level overtaken by
• Network Hospital become aware of the
system and create innovative ways to
Future frauds
Care pathway fudging
Wrong medical info for preauth
Incentivizing the patient for inflated billing
LTC product
Can We achieve 0 fraud level in Health Insurance ??
Typical reactions to suspected fraud? Abuse?
Why To Investigate?
 To control the claim ratio (ICR)
 To understand the behavior of hospitals in Region
 To identify the adverse claims behavior
 To identify the nexus if between any hospital and agent /
client or other intermediary
 To confirm hospital eligibility as per the policy conditions
 To control prolonged hospitalizations and over-billing / over
 To identify good hospital who are willing to work on
reasonable SOC under TPA network of hospitals
 To synchronize and educate hospitals / patients to utilize the
policy in proper manner
Trigger Points for Investigations
In cashless hospitalizations
Repeated admissions
High value claims
Irrelevant investigations
Prolonged hospitalizations
Repeated additional AL requests
Treatment/Procedure not consistent with the
Trigger Points for Investigations
In reimbursement claims
Admissions at suspected/blacklisted hospitals
Repeated hospitalizations of the same insured
Repeated hospitalizations of the family members
Admissions at same hospitals
Admissions at hospital located far from the residence
Well documented claims
Claims do not contain pre-post documents
High value claims not consistent with the ailment and
the provider
• Excess medicines billed for
In reimbursement claims……….contd
•Irrelevant investigations billed
•High tariff
•Manipulation in the bills
•Manipulation in ailment history
•Manipulation in dates
•The claim documents do not contain proper qualification of
the doctor
•There is no landline telephone number mentioned on the
hospital and pathology documents
•The registration number of the hospital is not mentioned in
the claim documents.
• In
Life Insurance or Death claims
•Claim in first year of policy
•High value claim
•Manipulation in the medical documents with
respect to history of ailments.
•Death due to Liver Disorder to rule out alcohol
•Death due to chronic disorder and claim in first
year of policy.
•Suspicious cases to rule out self-inflicted injuries
e.g; accident at railway track…… etc.and/or
homicidal cases.
Process followed for
Fraud detection
Cashless Claim Investigation:
• Visit is made to the hospital/nursing home by the investigator at the time
of AL issuance and after AL issuance on case to case basis.
• The insured admitted is verified with available ID.
• The ICP is checked and the line of treatment verified with the admission
request note.
• The class of admission is verified with that mentioned on the admission
request note.
• The probable date of discharge is found out from the treating doctor.
• The investigations carried out are verified with the ailment mentioned.
Reimbursement Claim Investigation:
• Suspicious claims are studied and the line of investigation is decided and
• Visit is made to the hospital/nursing home, pathology centers, medical
stores for verification of medical data included in the claim file.
• Visit is required to be done to the insured’s residence,
neighborhood, place of work, attendance needs to be checked at
schools and place of work as the case may require.
• Existing data of claim history related to hospitals/nursing homes,
blacklisted hospitals, insured incurring multiple claims, pattern of
claims arising from particular hospital ,claims arising from particular
geographical area ,from particular agent, is checked for which gives
fair idea on the mode of investigation to be followed.
In Life Claim Investigation:
Verification of Death Certificate
Verification of Insured Identity and statement from the relatives
Verification of hospital records for history of ailments
Verification from local pharmacy, general practitioner and neighbors
Verification from police records in case of suspected suicide or
• Expert opinion e.g;Medical Specialists like
Cardiologists,Neurologists,Forensic experts,etc.
Fraud and Abuse Claims %
Genuine Cases-83%
Fraud and abuse Cases-17%
Sample cases
Case 1
Claim Amount:Rs.25144
Details:Manipulation in
main hospital bill to
increase the claim
Case 2
Claim amount:Rs.110480
Case details:Hospital bill
amount was
enhanced.Revised bill
obtained from the hospital
Case 3
Claim amount:Rs.26850
Policy type:Individual
Case Details:As per written
confirmation from the
Pathologist the pathology
reports have not been signed
by him and the signature and
rubber stamp have been