Insurance Companies
Combating Insurance Fraud and Hospital Overcharges
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Estimates (confirmed by an Equifax study) are that over 90% of hospital bills contain errors-most of which are overcharges, in the hospitals' favor.
- Insurance fraud is costing Americans $80 billion per year and costing every family $950 per year, according to the Coalition Against Insurance Fraud.
- Healthcare fraud is costing Americans approximately $170 billion per year, according to a report by the National White Collar Crime Center (based on GAO estimates).
Where does this leave the insurance executive?
Special Investigations Units (SIUs) are charged with identifying and combating fraud. Unfortunately, few have the resources necessary to oversee an industry in which most invoices contain errors.
Many hospital bill auditing practices have invested millions of dollars in software programs. Such programs generally identify hospital bill overcharges in the 2%-3% range. In our view, a computer should not be the only tool used to identify and eliminate fraud. In order to achieve maximum results (particularly in bodily injury and Workers' Compensation claims), an auditing practice requires a committed team, using a combination of technical, analytical, investigative, and interpersonal skills.
Accu-Rate's team includes an investigative specialist, with a 20-year career in law enforcement and extensive experience in white-collar crime investigation.
In 2005, our team identified post-discount savings that averaged 16.2% per bill. In 2004 and 2005, we found overcharges in every bill submitted for our review.
In an ideal world, every claims executive would have the manpower and technology to conduct a line-item review of every medical claim, prior to issuing payment. As insurance companies struggle to do "more with less," however, the performance of detailed, in-house audits is not realistic. Accu-Rate can be the ideal outsource partner.
"Cost Shifting"
One of the greatest challenges facing claims and SIU executives is "cost shifting," the practice of shifting certain expenses from the bills of uninsured patients onto the bills of insured patients. For example, a portion of an uninsured patient's expenses may be moved to a Workers' Comp or bodily injury claim.
Examples of Cost-Shifting:
- Our team has seen $4,000 in hysterectomy charges, added to the bill of an auto accident victim with a broken leg.
- In a recent Workers' Compensation case, we found that fully 55% of the charges did not belong to our client's insured.
Here are two benchmarks to use in evaluating the effectiveness of your fraud prevention methods:
1. Are you finding overcharges in at least 90% of your hospital claims?
2. Are you finding pre-discount overcharges of at least 10% in Workers' Compensation hospital bills and at least 15% in bodily injury hospital bills?
If not, there is room for improvement... and we can help.
Correcting healthcare overcharges can have a dramatic impact on your division's loss ratio. You may even wish to generate a pro forma. Please consider the following question:
If every hospital claim were reduced by 10% before discounts were applied, what would your loss ratio be?
Remember this concept:
If a provider gives your firm a 40% discount, but the discount is applied to medical services that have not been provided to your insured; then you are not saving 40%. You are overpaying 60%.
Example:
1. An insurance company negotiates a 40% discount with a hospital.
2. An insured patient is hospitalized; and is overcharged by $55,000.
3. The Claims Department deducts 40% from the billed charges and approves payment of $33,000.
4. This amounts to a net overpayment of $33,000 in a single claim.