Understanding and combating medical provider fraud in Workers' Compensation

While many employers have good antennae to identify employee claim fraud, medical provider fraud can be more difficult to detect, but packs a stronger financial punch. A recent article in the Insurance Journal, "Medical Provider Fraud: The Most Common Schemes to Watch For" reports that according to California's Department of Industrial Relations, which has been at the forefront of fighting medical provider fraud in recent years, the most common schemes include:

"Fraudulent Billing and Billing Codes. The medical provider bills for visits or services that never occurred, billing both the workers' comp payor and the employee's health insurance for the same services, double-billing, billing separately for claims that are normally covered by a single fee, or using an incorrect billing code to charge more.

"Unnecessary Treatments. The medical provider performs unnecessary treatments, examinations or procedures to profit from them.

"Illegal Kickbacks. Working with other providers and receiving undisclosed payments or other benefits for making a referral.

"Soliciting. Working with runners, cappers or steerers to solicit or obtain injured workers for the medical provider.

"Pharmaceuticals and Medical Equipment. Pharmacies providing generic drugs and billing for brand-name prescriptions, billing for medical equipment that was never dispensed, or selling used medical equipment as new to upcharge."

The unethical providers can be part of a "claims mill" when marketers, doctors, lawyers, and medical providers work together to maximize their income. One of the most famous, Operation Spinal Cap, involved a scheme that stretched over 15 years and originated in Southern California. The scheme billed workers' compensation insurers hundreds of millions of dollars for spinal surgeries on patients who had been referred by doctors and others who typically got illegal kickbacks of $15,000 per patient. In addition to the monetary cost, over 160 patients have filed lawsuits, many of them experiencing excruciating pain as a result of the surgery.

Lone providers can also be offenders. In some cases, billing patterns of upcoding therapeutic procedures and exercise can be subtle, but when extrapolated over hundreds of claims, can drive incremental revenue.

The good news is that many insurance companies have adopted data technologies that cut the time needed to recognize fraud. But employers still have an important role to play. The best ways to help combat medical provider fraud, as well as ensure the best outcome for your injured worker, are:

• Partner with occupational medical providers who can diagnose and treat workers' injuries effectively and familiarize themselves with the specific conditions of your workplace to create a practical, effective treatment plan that returns an injured employee to work quickly and safely. Educate employees on the value of working with such providers.
• Stay focused on your Recovery-at-Work program.
• Communicate with your injured employees to determine if they have concerns about their treatment. Encourage second opinions by qualified physicians if surgery is recommended.
• Recognize delayed recovery problems, unusual treatments, increase in frequency of appointments, excessive billing early and report to the claims adjuster.
• Be aware of trends. It's a red flag if the same medical providers and law teams are working on problematic claims.
• Report any suspicions of medical provider fraud.