Corporate Research Group’s Weblog

The Blue Cross Blue Shield Assn. reported that anti-fraud efforts among its member companies saved nearly $350 million in 2008, an increase of 43% from 2007.  The number of cases opened increased nearly 34%. 

Separately, WellPoint (the nation’s largest owner of BCBS plans) said it saved and/or recovered nearly $75 million in 2008 from anti-fraud efforts.   

How much is lost to healthcare fraud every year?  According to the FBI, an estimated 3% to 10% of all healthcare spending – or up to $240 billion – is lost to healthcare fraud annually. 

In 2007 (the latest data available), the FBI investigated 2493 cases of healthcare fraud resulting in 839 indictments, 635 convictions, $1.12 billion in restitution, $4.4 million in recoveries, $34 million in fines, and 308 seizures valued at $61.2 million.

The National Health Care Anti-Fraud Assn., which released a report last month on the problem of healthcare fraud, points to Florida — especially South Florida — as a hotbed of activity.

One example in Florida stands out – the problem of “phantom” health care providers – providers that do not exist except on paper, but who manage to defraud public and private programs of millions of dollars. A recent project in Florida to validate durable medical equipment (DME) providers demonstrated that nearly one third – 481 – of the 1600 DME providers simply did not exist. These phantom providers across South Florida collected hundreds of millions of dollars from Medicare, Medicaid and other public programs in a matter of years.

The NHCAA study notes that the example of Florida serves to highlight broad weaknesses in the nation’s overall healthcare system around fraud:

A lack of effective controls in public and private health care programs, particularly when attempting to identify fraud prior to the payment of a fraudulent claim; 

 The enormous losses which can be generated by a small segment of the system (one small geographic region generating hundreds of millions of dollars in fraudulent claims from just a few health care services); 

 The impact from fraud affecting both public and private health care programs;

 The need for improved information sharing and cooperation between public law enforcement agencies;

 The additional – and equally important – need for information sharing between those public agencies and the private health insurance industry. 

Given the need to control future healthcare costs to pay for reform, I’m guessing that efforts to detect healthcare fraud will get even more attention going forward.

Addition (July 1, 2009; 2:43 p.m.): The BCBSA fraud figures include commercial, FEHBP and other business lines, but exclude Medicare and Medicaid.  Separately, industry groups tend to quote the lower end of the FBI’s range of 3% to 10% when estimating fraud as a percentage of healthcare expenditures.