Blue Promise: Why Should Employers Care About Fraud?

Just like any other industry, the health care system is full of both good and bad actors. Fraudulent behavior might be happening right under your nose, and it impacts more than just your bottom line. Find out more in this episode of Blue Promise, featuring Ryan Zarfoss, formerly employed by the FBI and now serving as senior manager of special investigations at Blue Cross and Blue Shield of Texas. If you suspect fraud, there are ways to report it. Call our fraud hotline at 1-800-543-0867 or visit our website. 


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What Is Blue Promise? 

Blue Promise is a podcast and online video blog that aims to address complicated health issues with candid conversations from subject matter experts. New editions are published regularly and are hosted by Dr. Dan McCoy, President of Blue Cross and Blue Shield of Texas. 

Show Transcript

DAN: Just like any other industry the health care system is full of good and bad actors. Fraudulent behavior might be happening right under your nose and it impacts more than just your bottom line. Thanks for tuning into Blue Promise. I'm Dr. Dan McCoy and I'm the president of Blue Cross Blue Shield of Texas. I'm joined in the studio today by Ryan Zarfoss. He’s our senior manager of special investigations here at Blue Cross. So, Ryan just before we get started, we've done some podcasts before but what is fraud, waste and abuse? 

RYAN: Really quickly, fraud is just intentional misrepresentation. That's when we get that claim form and there's probably something on there that's just not true. And in an attempt to get paid. Waste is just you know it's being sloppy or using excessive resources to accomplish needed health care. And then abuse is really performing services that really aren't necessary. Now you may have really performed them. That claim form is absolutely true.There just no real basis for performing the services.  

DAN: So, you and I were chatting and were kind of chatting in the break a little bit about a case that you just worked on. Tell me a little bit about that.  

RYAN: We've had an interesting case where a marketing company links up with one of those diagnostic laboratories or reference laboratories and pairs them with a long-term care facility. And the purpose in doing that is those diagnostic lab tests that the lab is going to do are going to be billed by that long-term care facility. And the reason that happened is because that marketing company knew that it was a contract provision under outpatient services that they can make a whole lot more money by having the long-term care facility bill for those labs. Our investigation, when we got rolling with that, ultimately showed that that's what exactly what was happened so those claims were a misrepresentation. And oh, by the way, that long-term care facility, they didn't even have the capability to do the services that they were billing for. And as a result, we paid a whole lot of money for those services. And plus, there was probably in my mind a patient risk aspect to that as well. 

DAN: Ok. So, let's back up because this is really kind of fascinating it's kind of a complicated case. So, let's define some of these. I'm going to use a fancy crime word here, perpetrators right. Let's use this word. Let's talk a little bit about this marketing company. These are companies that really are, their sole purpose is to figure out a way to bill a patient or an insurance company or an employer for a service. That's their sole purpose.  

RYAN: That is right. There are many companies out there doing that right now.  

DAN: So, they're going around marketing their services, figuring out ways that they can enter the system. So that's the first thing that was kind of odd. The second thing is these services might have a legitimate purpose in the right hands with the right doctor in unique circumstances. I mean these are often tests that I mean they're tests that theoretically could be ordered.  

RYAN: In theory yes. 

DAN: In theory yes. And so, they search out and find a way where maybe a contract provision or something that's outside the norm that can slot around the radar like a long-term care facility. Which may or may not have any reason whatsoever to order these tests.  

RYAN: That's correct.  

DAN: And they just order the test through there, so they can charge the employer more money. 

RYAN: They're charging more money because the contract allows it. And I would say you know when you go to that patient risk aspect, in this particular case, those laboratory samples, you know those drug testing and urine samples of blood samples. They were being shipped hundreds of miles from where those samples were drawn, and those test results were taking a long time to generate. All in the name of trying to get more money for those tests because that reference lab wasn't even an area or regional lab for all those patients. So, think about that as a medical professional about how long some of those samples are sitting. Are you really getting valid test results from that? Are patients really getting the results that they need because people are trying to make too much money? 

DAN: OK. So, I talk a lot around the state and around the country and people and I mention fraud, waste and abuse and people immediately kind of go, they kind of minimize it. Well, okay somebody billed for the wrong test, but this was a pretty big fraud and not unusual. 

RYAN: It's not unusual in the fact that we've got more than just one example of this going on with our special investigations unit right now. We have multiple cases that touch on this concept 

DAN: So, what kind of dollars are we talking about? Are these like thousand-dollar frauds? 

RYAN: We’re talking in the case that I'm referencing in a four-and-a-half-month period, one provider made about nine point six million dollars.  

DAN: One provider. 

RYAN: One provider who really didn't have the capability to even perform the tests but because they got a higher reimbursement rate there was money to be split between them, the lab doing the tests, and the marketing company. 

DAN: So there's a lot of people involved in this scheme which isn't unusual. But walk me through how these people benefit from that kind of fraud. 

RYAN: OK. Well, again if you're paying more than you should have because the lab should have only gotten say x amount of money. If you paid a lot more than that to another entity, that entity has a relationship with a marketer and the lab and they're regularly making payments back to those other entities because that marketing company is controlling where all of those laboratory samples come from. 

DAN: Ok. So, I'm pretty familiar with this industry and it sounds to me some of that might have been a kickback. Kickbacks aren't allowed in healthcare spending right? 

RYAN: Kickbacks are not allowed in health care. Kickback arrangements are illegal and it's you know something that you often encounter when you start looking at straight up fraud. 

DAN: So, we talked a little bit about the patient safety aspect which is horrible. But how does it impact maybe the employer that was paying for those for those services?  

RYAN: Sure. There's a couple different impacts to employers. First of all, is straight up there's cost impacts. If you're a fully insured group with us you know initially those claims just get paid. But at some point, you may come up for renewing your agreement with Blue Cross and unnecessary and excessive services that were paid are probably going to impact those insurance rate. Now compare that to some of our groups who are administrative services only groups where it's really their money, well they're paying straight up in a way for those excessive services, for that fraud. And that's coming out of their pocket. So first of all, there's really a cost aspect. And then second of all, there can be a productivity aspect you know for employers. If you've got people, members or your employees caught up in say bad care where they're getting referred out for unnecessary physical therapy or services that are repetitive, you've got people that may not be on the job. They're out there getting health care. And sometimes we see it as it's not really needed or necessary. In fact, it could even be harmful. 

DAN: So, it's taking people away from the time that they could be at work or even enjoying their time with family. So, you know we have pretty sophisticated systems here at paying claims. I mean we're really good at detecting you know either something that's coded incorrectly or doesn't seem to fit what the diagnosis was. But I think what's interesting about this example and I think I want you to talk a little bit about it. When people are being intentional. I mean they're being very intentional to figure out ways to deceive. It becomes harder and harder to solve these kind of crimes. Right? I mean it's just every time you turn around there's another scheme out there. 

RYAN: That's part of the challenge of working in special investigations the schemes constantly modified to try and stay ahead of what we learn as enforcement entities whether it's the insurance side or working with the law enforcement side. Very, very challenging the schemes always change. 

DAN: So, we're always watching, and we had a great podcast on what we think patients and employees should watch for. What should employers be able to look out for? 

RYAN: Employers should be really on the lookout for I would say a couple things. First of all, is the basics that I kind of touched on them a minute ago. How are your employees doing? Are they coming to work? What's attendance look like? Are there changes you know in say a small employer setting? Is that key person doing ok? In a large employer setting, do we have a measurable change in just attendance or work patterns with our workforce and why is that? Do we know through some reason that you know there's something out there now that's drawing or people away and then also on the individual level, behavior. And what I'm talking about here is you know there's also a lot of schemes that we look at that deal with prescription drugs. And unfortunately, there are schemes that will unduly affect our members by pushing or putting them on medications that they may not need. Some of them just have bad side effects. Some of them are actually highly addictive. So, be on the lookout you know through your managers and through your mentors, through your employee assistance staff in your company to be on that lookout for change and behaviors amongst your employees.  

DAN: And ask questions. I think that absolutely that it's ok to ask questions. What have you seen some employers do to help battle it? 

RYAN: Ok. There's really, I think two ways you can go to address you know fraud impacting you as an employer. One way is you know you can change your benefits. An example that's really recent is we had one large employer group that had a certain level of benefit for hearing aids. That benefit was we'll pay for a hearing aid every year. There's no cap but that's part of what we offer. Well about 19 million dollars later and some criminal convictions with an entity that was really pushing those hearing aids that benefit was changed to now it's once every three years. Now there is a price tag cap on that benefit and the benefit in our estimation is very reasonable still. But it did cause a benefit change. The other thing that you can do is a little bit more innovative and I will use us as an example as a company because we really really promote wellness. We train and educate our employees on healthy habits. We offer them wellness services whether it's how to eat right or you know exercise programs. We also do things like you know that biometric screen where you can get measured because preventive care is also a key to fraud not just a healthy life. If you can stay out of your doctor's office because you have good habits and your employer encourages those good habits, you're automatically addressing and reducing the aspects of fraud as a byproduct of that.  

DAN: Well, Ryan this is great information for our employers and great information for everyone. Thanks for joining today and thanks for joining us for this episode of Blue Promise. 


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