fraud prevention for health insurers

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www.advancecons.com For Health Insurers Attacking Health Claims Fraud October, 2014

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Describes how fraud can be detected at the point of service providing significant savings to insurers and their customers. This overview shows how Castlestone Advisors' CMS-tested technology prevents health insurance fraud. Offered as a web-service via insurers and ACO's, extremely low cost, small footprint technology catches fraudulent transactions w/o

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Page 1: Fraud prevention for health insurers

www.advancecons.com

For Health InsurersAttacking Health Claims Fraud

October, 2014

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Outpatient fraud prevention is a significant business opportunity for Health Insurers

• Nationally, 7-10% of all healthcare claims are fraudulent; this means between $150-200 billion in fraud, annually

• 40%, $60-80 billion, is Outpatient services (DME, home health, IDTF, transport, pharmacy)

• Outpatient fraud thrives whenever it is difficult to verify that patients and/or providers were where the claim says they were– Services not rendered– False dates and locations of service– Falsifying providers– Falsifying prescriptions and orders

By verifying patient and provider location as services are delivered Insurers, members, companies and regulators can reduce the frequency and cost of outpatient health care fraud

Proprietary and Confidential Intellectual Property of Castlestone Advisors, LLC

$60-80 billion

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There are many types of health claims fraud for which real time verification and analysis is key to remediation

- Fraud Scheme¹ –1. Billing for services not rendered (12% of all

fraud)

2. Misrepresenting dates of service

3. Misrepresenting locations of service

4. Misrepresenting provider of service

5. False of unnecessary issuance of prescription drugs

- Remediation -1. Verify identity and location of patients and

providers; Eliminate “phantoms”

2. In real time, verify and analyze time and date

3. Verify and analyze locations in real time

4. Verify providers in real time

5. Verify and validate patient-at-physician and prescription-at-pharmacy in real time

¹ Source: Fraud Examiner’s Manual 2013

Traditional, data analytics based fraud prevention approaches do not operate in real time and are primarily effective chasing larger sized frauds

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Approaches like the Fraud Protection System (FPS) target “egregious” incidents; may prevent payment; do not prevent occurrence

1. FPS predictive models identify egregious, suspect, or aberrant activity

2. FPS targets CMS’s investigative resources on the most urgent leads

3. Necessary, but time consuming and costly, human investigation focuses action on large, “material” and “profitable” cases

4. Actions include• claims processing edits, • claim denials, • prepayment review, • payment suspensions, • revocation of Medicare billing privileges, and• referral to law enforcement

In it’s 2012 Report to Congress, CMS said that FPS – the fraud prevention system, showed success (ROI of $3 for each $1 invested) but focused on “egregious” and “the most urgent” leads

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CastleStone’s real time solution prevents fraudulent transactions as they are attempted

2. Data on Card ID, Terminal Owner, Terminal LocationMerchant Code, Transaction Code, Time Stamp

3. Claim Matching • Verify terminal code• Verify medical merchant code• Lost or stolen card?• Previous time and location of swipe• Existing Rx for Class II drug?, etc.

4. Approve, Refer or Deny

5. As appropriate, verify before taking action

At the:• Merchant• Provider• Physician• At home

1. Patient swipes card

Health Insurer’s Analytics(Can include PMP analytics)

Proprietary and Confidential Intellectual Property of Castlestone Advisors, LLC

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Example Pilot – Medicare Durable Medical Equipment (DME) with CMS (Medicare) and National Government Services (WellPoint)

• Technology Test Project in Indianapolis area• 3,000 physicians and suppliers • Project completely implemented in 65 days (transaction capture, claim matching, file and

interface implementation)

• Capabilities– Verifies outpatient visit– Verifies location of visit– Verifies provider and proper location match– Attests that physician order came from physician office– Blocks order after fill

• Results – ROI estimated in excess of 250%

Proprietary and Confidential Intellectual Property of Castlestone Advisors, LLC

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Health Insurers can target CastleStone services to the varied needs of individual service lines

- Service Line -1. Outpatient Claims

2. Durable Medical Equipment and Home Health

3. Mental Health

4. Independent Diagnostic and Testing (IDTF)

5. Transport

6. Pharmacy

- CastleStone Impact -1. Verify where, when and who was at the

provider office

2. Verify face-to-face visit/authorization with doctor

3. Attest to visit via mobile solution

4. Document the original order and member’s attendance

5. Document pickup and delivery, times and locations

6. Prevent diversion and doctor shopping

Proprietary and Confidential Intellectual Property of Castlestone Advisors, LLC

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Cost and Implementation Considerations

• Card Creation– Castlestone creates/activates/deactivates and manages cards based on guidelines. Plan

Sponsor existing card manufacturing contracts can be used if they are compatible• Hardware cost for plan & providers

– NONE. Uses existing credit card terminals • Network costs for plan & providers

– NONE. Uses the existing credit card networks from provider offices for transactions• Systems & programming costs

– S&P is very simple data exchange of new/change/delete clients or full real time integration• Cost Structure

– Design and programming & card cost– Hosting (data base & monthly hosting and management)– Monthly per-member transaction fees

Proprietary and Confidential Intellectual Property of Castlestone Advisors, LLC

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Typical Results

• Set up completely implemented in 60-75 days, depending upon client resources

• All technical milestones (transaction capture, claim matching, file and interface implementation) exceed goals for speed and performance

• ROI for fraud prevention ranges from 125%-200% and can significantly exceed this

Proprietary and Confidential Intellectual Property of Castlestone Advisors, LLC

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CastleStone’s request of Health Insurers

1. Examine the service offering more closely in the context of known and estimated claim and fraud rates

2. Develop hypotheses on the impact and value, tangible and intangible, to patients, providers and the community at large

3. Determine a combination of service line and market to test the hypotheses

4. Refine the test, run it again, decide to implement widely

Proprietary and Confidential Intellectual Property of Castlestone Advisors, LLC

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Contact Us

Proprietary and Confidential Intellectual Property of Castlestone Advisors, LLC

Doug BrockwayAdvance ConsultingCastlestone New England

(617) [email protected]

www.advancecons.com

CIO Advisory | Program Management | Business Development Jeffrey LestonPresident Castlestone Advisors LLC

(212) 874-4390 [email protected]

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Appendix

Other presentations and reports you may find of interest include:

Title LinkFraud Prevention for Health Insurers http://slidesha.re/1pCGh98

Doctor Shopping and Prevention http://slidesha.re/1nNb9OL

CMS Pilot/Test of VisitEye http://slidesha.re/1vlGGeU

Management Tech. for Therapeutic Cannabis http://slidesha.re/1nQ5JkD

Corporate Wellness http://slidesha.re/1qQf6Fi

Proprietary and Confidential Intellectual Property of Castlestone Advisors, LLC

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Fraud Efforts – representative example: New Jersey audit of Horizon BC/BS

State Comptroller audit finds Horizon NJ Health failing to aggressively investigate and recover misspent Medicaid dollars for the state

An audit released today by the Office of the State Comptroller (OSC) found the state’s largest Medicaid health maintenance organization has done a poor job of pursuing and reporting fraud and abuse recoveries that would lower insurance costs paid by the state.

According to the audit, Horizon NJ Health (HNJH) recovered only $188,207 in improper Medicaid payments to its network providers and enrollees in 2009 and 2010. Those recoveries represent less than one-tenth of one percent of the $1.3 billion HNJH receives annually from the state”

October 18, 2011 Contact: Pete McAleer

609-633-2377

Proprietary and Confidential Intellectual Property of Castlestone Advisors, LLC