Provided by Coventry Healthcare® ©2010 Coventry Health Care. All rights reserved. Proprietary –...

Provided by Coventry Healthcare®

©2010 Coventry Health Care. All rights reserved.

Proprietary – Do not copy, distribute or disclose without permission of Coventry Health Care

California Medical Bill Reviewer Certification

Unit 1: Workers’ Compensation Benefit

ProgramModule 2: Fraud & Abuse of the Workers’ Compensation

System

CA Regulations Training – Fraud & AbuseMarch 2010

2

OverviewHi! In this module, you will learn about

the difference between fraud and abuse. Then, you

will learn about who can commit fraud

and abuse.

Part I: Fraud and Abuse of the

Workers’ Compensation System

The Difference Between Fraud and Abuse What is Considered Abuse? What is Considered Fraud?

Part I: Fraud and Abuse of the

Workers’ Compensation System

Let’s start by discussing the

effects of fraud and abuse of workers’ compensation...


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The Cost of Fraud and Abuse

The total cost of workers’ compensation in California in 2002 was an estimated $32 billion.

The cost of fraud alone to the workers’ compensation system is estimated between:

Clearly, fraud and Clearly, fraud and abuse have a abuse have a

significant negative significant negative impact on the cost impact on the cost and efficiency of and efficiency of

the workers’ the workers’ compensation compensation

system!system!

$1-5 billion per year!


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InjuredWorkers

LaborUnions

InsuranceCompanies

Employers

Attorneys

ServiceProviders

RegulatoryAgencies

Aren’t Fraud and Abuse the Same?

Both fraud and abuse have a negative impact on all of the entities in workers’ compensation.

However, as you will see, fraud and abuse aren’t quite the same.


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What Exactly is Abuse?

Abuse: any practice that uses the workers' compensation system in a way that is contrary to either the intended purpose of the system or the law.

Abuse can be considered criminal behavior, but not

always. Let’s take a look...


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Abuse of the Workers’ Compensation System

If temporary disability benefits continue after the injured worker returns to work, and no one ever asks the claimant if he is working, there is an ABUSE of temporary disability benefits, but there is no written lie and therefore no insurance fraud.

Let’s take a look…


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Abuse of the Workers’ Compensation System

“I wonder why the checks are still

coming…Oh well, I guess the State

must know best.”


8

Fraud

Part I: Fraud and Abuse of the Workers’

Compensation System The Difference Between Fraud and

Abuse What is Considered Abuse? What is Considered Fraud?

Now that you understand what abuse

of the system is, let’s talk

about fraud.

What is Considered Fraud?


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What Constitutes Fraud?

Fraud: any practice that is done knowingly and with intent to mislead, in order to gain some benefit, or to cause a benefit to be denied.

The most significant type of criminal abuse to the workers’ compensation is insurance fraud.


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Criteria for Fraud

1. A lie must be identified.

2. The lie must be material.

There are two qualifying criteria for

fraud.



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Criteria for Fraud: Identifying a Lie

1. The presence or absence of a specific, provable lie distinguishes between abuse and fraud.

Identify a provable lie.

In order for an act to be considered fraudulent, a

material, written lie that was presented to or by an insurer must be identified.


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Criteria for Fraud: A Material Lie

2. The lie must be material, which means the lie must make a difference in the outcome.


The lie must be material. This prevents prosecution on

the basis of some minor error of memory or transcription

which did no harm or had no cost involved.


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Fraud of the Workers’ Compensation System

If someone such as the adjuster or the doctor specifically asks the claimant if he is working and the claimant lies and replies “No...”

• ...and the lie is transcribed in a written document-- INSURANCE FRAUD has occurred.


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Fraud of the Workers’ Compensation System

“Hi Mr. Jones, I need to update my

claim records…have you returned

to work?”

“Uhhh, no, the doc says my leg

isn’t quite healed…”


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Legal Ramifications of Fraud

If the amount or duration of temporary disability payments are determined based upon a lie, legal action can potentially be taken under the Workers' Compensation Law and Penal Law.


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Who Commits Fraud and Abuse? Now that you are

familiar with fraud and abuse, let’s

move on to who can commit fraud and abuse, and what’s

being done to prevent it.

Part II: Who Commits Fraud and Abuse?

Patient Fraud Provider Fraud Organized Fraud Employer Fraud Insurance Carrier Fraud Government Fraud

Regulatory Agencies: What’s Being Done?

Part II: Who Commits Fraud and Abuse?

Patient Fraud Provider Fraud Organized Fraud Employer Fraud Insurance Carrier Fraud Government Fraud

Regulatory Agencies: What’s Being Done?


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Who Commits Fraud and Abuse?

You might think that dishonest injured workers and greedy providers are the only parties guilty of committing fraud. But, in fact, this is not the case. There are several

parties that can be guilty of committing fraud.



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So, Who Exactly are the Guilty Parties?

Patients Providers

Employers GovernmentInsurers


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Workers may:

Patient Fraud & Abuse

Let’s start by discussing the types of fraud that can be committed by injured workers, or patients.

Fake an injury.

Lie about the extent of their injury.

Lie by denying that they filed previous claims.

Fail to disclose a prior injury to the same body part.

Claim a non-work injury is work related.

Illegally work while obtaining benefits.


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Staged Injuries

The injury may be what is termed a staged event, which means the injury never took place. The injury may have

occurred outside the workplace.

The injury may have been caused by

horseplay at work.

The injury may be a “slip and fall” incident. The worker

may have avoided the incident, such as slipping in a puddle of water, but instead allowed themselves to fall in

order to claim injury.


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Extended Recovery Time

Occasionally workers may extend their recovery time off work.

The patient may exceed the stated normal limitations for a specific injury, and then claim lack of improvement or onset of new symptoms.


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Patient Fraud in the Real World

Illegal Work:A former food worker in Hawthorne, CA collected $128,000.00 in benefits

for a shoulder injury while taking similar jobs at other school districts around the state during

the time he was on leave.


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Provider Fraud and Abuse

Medical providers can also commit fraud and abuse of the workers’ compensation system.



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Self-Referrals

Creative BillingUpcoding

Provider Fraud and Abuse

Medical provider schemes include:

Upcoding: Providers may bill for a

more expensive treatment than the

procedure performed.

Creative billing: Providers may bill for

services not performed.

Self-referrals: Providers who

inappropriately refer a patient to a clinic or

laboratory in which the provider has an interest.


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…Even More Provider Schemes

“Hmm, 1 fracture or 2,

that is the question…”

Product Switching

Unbundling

Unbundling: Providers may perform a single service but bill it as

a series of separate procedures.

Product switching: A pharmacy or other

provider may bill for one type of product but dispense a cheaper

version, such as a generic drug.


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New and Improved…

Newer forms of fraud and abuse that occur under managed care arrangements include:

Kickbacks

Overutilization

Underutilization

Underutilization: Doctors who receive a fixed

fee per patient may not provide a sufficient level of

treatment.

Overutilization: Doctors may provide

unnecessary treatments or tests to justify higher patient fees in a new contract year.

Kickbacks: Doctors may receive incentives for patient

referrals.

Providers may also shift from the less expensive,

all-inclusive patient report to supplemental reports,

which add evaluations and incur separate charges.


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Organized Fraud

In some instances, providers and lawyers work to commit fraud together. This is known as organized fraud.

Organized workers’ compensation fraud that involves doctors and lawyers has been an ongoing problem, especially in Southern California.


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Organized Fraud

Fraud rings have made a practice of recruiting people to file phony work injury claims.


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Organized Fraud

The workers are sent to medical clinics or legal referral centers commonly known as "claim mills," which in turn refer them to a doctor or lawyer who is in on the scheme.


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Organized Fraud in the Real World

Although the campaign against California claim mills wiped out a substantial part of medical provider abuse, new cases continue to emerge.



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More Fraud in the Real World

In October of 1997, a pharmacist pled guilty to 21 counts of fraudulent workers'

compensation insurance billing. The pharmacist

increased his revenues by up to 500% per prescription on

more than $600,000 of drugs sold over a four-year period.


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Employer Fraud & Abuse

Employer fraud is one of the fastest growing areas of workers’ compensation insurance and can take many forms.



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No Workers’

CompensationInsurance

No workers’ compensation insurance: Some businesses are part of the "underground economy" and carry no workers’ compensation insurance at

all.

Employer Fraud and Abuse

Declaring Independent Contractors

Underreporting Payroll

Underreporting payroll: Employers reduce their

premiums by not reporting parts of the work force,

paying workers off the books, or creating a companion

corporation to hide a portion of the employees.

Declaring independent contractors:

Employers avoid premium payments for employees by

classifying them as independent contractors or

leased employees even though they are legally

employees.


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Employer Fraud and Abuse

UnderestimatingEmployment Projections

Misclassifying Workers

Misclassifying workers: Employers intentionally misrepresent the work

employees do to put them in less hazardous occupational categories and reduce their

premiums.

Underestimate of employment projections:

Employers deliberately underestimate employment projections at the beginning

of the premium year and essentially receive an

interest-free loan from the insurance company for the amount that would have

been required to insure new employees.

For example, an employer may save money on

premiums by reporting a roofer as an office worker.


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Insurer Fraud and Abuse

Unscrupulous insurers may also commit fraud in workers’ compensation claims.



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Insurer Fraud and Abuse

Employers or employees of an insurance carrier

may make false statements regarding a worker’s entitlement to

benefits to discourage the worker from pursuing a

legitimate claim.

Insurance companies could theoretically

mislead prospective clients, collect premiums for insurance coverage

not provided, inflate premiums, or fraudulently fail to pay an appropriate

claim.


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…More Unscrupulous Insurers

Insurance companies could use delaying tactics

to hold onto legitimate claim payments longer

than necessary to maximize their own

accounts.

Insurance companies could alter codes provider services routinely in order

to pay out less.

Although, the law indicates, an entity reviewing an itemization of service submitted by a physician or medical provider shall not alter the procedure codes, there is an exception when supporting documentation does not match level of service. At which point, an Explanation of Review (EOR) shall provide an explanation of the alteration to provider of service.


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Government Fraud and Abuse

Even the government can commit acts of fraud and abuse.



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Government Fraud and Abuse

BiasBribes

Conflict of Interest

Conflict of interest: Any workers’

compensation judge is disallowed from sitting on a case in which he has an interest or is employed by

any of the litigating parties.

Bribes: Offering or accepting kickbacks for

the referral or settlement of cases can contribute to fraud and therefore is a reportable and highly prosecutable crime.

Bias: It is considered abusive for a workers’ compensation judge to

preside over a hearing for any claimant to whom the

judge could not be impartial.


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Injuries included:

Government Abuse in the Real World

In 2004, the Sacramento Bee published an article noting that “California’s 150 workers’ compensation judges are six times more likely to file on-the-job injury cases than their judicial counterparts in state government.”

Rearranging artwork Slipping on a lunchroom

puddle Loading a crate in a trunk Tripping over a phone cord Writer’s cramp


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More Government Abuse…

Judge Bernardine Baldwin of Santa Monica filed a claim in August of 2004 for injuries to her “heart and psyche from ‘inadequate staffing and

security, deadlines, attorneys’ and parties’ harassment & conflicts

with angry, hostile litigants.’”


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Crime Fighters…

FRAUD

Department of

Insurance

District Attorneys

Offices

Insurance Companies

Fraud Assessment Commissio

n In 2004, local DA’s in LA County prosecuted 263 fraud cases, which represented more than $54 million in chargeable fraud.

The Department of Insurance has its own Fraud Division investigating accusations of fraud.

The FAC prosecuted an employer who reduced the premiums for workers by classifying them as clerical workers, hiding payroll, and using shell corporations to evade surcharges.

Some insurance companies have their own fraud and abuse departments that track suspicious billing practices in their systems.


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Summary


The lie must be material. What constitutes fraud

and abuse.

Who commits fraud and how it’s done.

FRAUD Who investigates and prevents fraud.

Abuse of the workers’ compensation system.


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Module 2 QuizClick on the link to go directly to the quiz. Feel free to review any of the

material before you move on.

Good Luck!

Quiz:U1M2: Fraud and Abuse

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