NJ’s Investigators Stay Ahead of Multi-Million Dollar Health Insurance Scams

Lilo H. Stainton | July 7, 2016 | Health Care
Special investigators are on the alert for ‘The Phantom Doctor’s Office’ and ‘The Impossible Day,’ to name just two swindles

health insurance fraud
Armed with high-tech analytical software, a vast knowledge of healthcare billing codes, and a patience for continuous data-sifting, health insurance investigators in New Jersey continue to ferret out fraudulent scams that cost the public hundreds of millions of dollars each year.

On Wednesday, Horizon Blue Cross Blue Shield, the state’s largest private health insurance provider, with more than 3.8 million members, announced that its team of in-house sleuths had “generated” $43.2 million in savings last year, a combination of “monies recovered and losses avoided,” and opened nearly 900 new fraud cases. The results are not far off the record $45.4 million haul its Special Investigations Unit (SIU) obtained in 2014, Horizon said.

Employed by federal and state government agencies, as well as private health insurance companies, investigators work together — and with colleagues in other states — to block an evolving array of billing, testing and treatment cons; to catch and discipline medical professionals who commit fraud; and, when possible, to recover assets from those who are found guilty.

Sorting through reams of claims data, they can uncover patterns that eventually can result in major prosecutions. Collaborating with peers in other jurisdictions is becoming increasingly important as the frauds often stretch across multiple states, according to Douglas Falduto, a vice president and chief security officer at Horizon.

Those connections helped Horizon identify several trends in New Jersey last year that previously had cropped up in Texas, California, and Florida. The “Phantom Doctor’s Office” involves a pop-up site with fake providers who file claims for bogus treatments using stolen identification cards, then disappear. The “Impossible Day” scam involves a real physician who submits claims for dozens or hundreds of patients – far more than one provider could possibly treat in 24 hours.

“Health care fraud remains a major problem for not only Horizon but for health insurers nationwide, so we are especially vigilant to protect our members from fraud activity that may migrate to New Jersey from other states,” Falduto said. Since 2005, Horizon anti-fraud efforts have saved members $290 million, he added.

Nationwide, tens of billions of dollars are lost each year to healthcare fraud, according to the National Health Care Anti-Fraud Association, which represents private insurance company investigative units. The cost of the scams, if unchecked, is borne by health insurance purchasers. In the case of fraud involving government programs like Medicare or Medicaid, the cost is borne by the public.

New Jersey has taken an aggressive approach to combating fraud, experts said, thanks in part to the strong regulatory requirements built into the 1983 Insurance Fraud Prevention Act. Among other things, the law required private companies to establish SIUs and ensure they worked with government partners.

“Insurers in New Jersey have partnered well with government agencies to identify insurance fraud,” explained Wardell Sanders, president of the New Jersey Association of Health Plans, which represents private insurance companies. “The ability of insurers to identify fraud has improved in the last decade,” he added. “Sophisticated analytics to continuously review claims has become a powerful new tool to identify possible fraudulent activity.”

The Bureau of Fraud Deterrence in New Jersey’s Department of Banking and Insurance also monitors for private-sector fraud. The state Office of the Comptroller’s Medicaid Fraud Division and the federal Department of Health and Human Services, Office of Inspector General oversee publicly funded insurance programs, like Medicare, Medicaid, and Family Care.

When fraud cases are eligible for prosecution, the legal proceedings are handled by the state Attorney General or the federal U.S. Attorney’s Office. In 2015, Horizon alone referred 187 cases to these agencies.

Once charges are filed, fraud cases can become public and, the more lavish the details, the more likely they are to attract media attention. For example, last month U.S. Attorney Paul J. Fishman announced guilty pleas in a bribery case involving Biodiagnostic Laboratory Services (BLS), of Parsippany, considered one of the largest of its kind nationwide.

The scam, in which the lab owners bribed doctors to generate more than $100 million in fraudulent claims, first made news several years ago when one owner testified about spending the illegal profits on sports cars, private jets, sporting events, and at so-called gentlemen’s clubs.

The BLS investigation has led to 40 guilty pleas, more than half involving physicians. Fishman’s office has recovered $12 million from the company so far. Since 2010, it has raked in more than $1.29 billion in healthcare fraud and government fraud settlements, judgments, fines, restitution and forfeiture.