Fraud, waste and abuse continue to plague medical schemes industry, costing up to R28bn a year

30 Jan 2023

In the past year, Medscheme has recovered more than R155m on behalf of the 11 schemes it administers, and reduced billing behaviour over the past two years by more than R3bn. ‘That’s just the fraud we were able to identify and prove, and it was the tip of the iceberg,’ says Gerda Strydom, general manager at Medscheme Forensics.

One of the largest medical aid administrators in the country, Medscheme, is responsible for the administration of 11 schemes including Bonitas, Polmed and Fedhealth, and also provides forensic services to other schemes it does not administer.

Although the Covid pandemic thrust healthcare into the global spotlight in recent times, the Council for Medical Schemes (CMS) says the sector still loses R22-billion to R28-billion a year in South Africa alone due to fraud, waste and abuse (FWA).

“That’s a conservative estimate because the exact number is hard to quantify. Some companies say anything from 5% to 15% of healthcare claims could include an element of fraud, waste and abuse,” she says.

Strydom says the fraud triangle — pressure, opportunity and rationalisation — leads to conditions that increase the likelihood of fraud being committed.

“In this economy, financial pressure is most definitely a reality for many,” she says, adding that fraud is often committed by healthcare providers and medical scheme members alike.

“Fraud also contributes to the cost of healthcare increasing due to the heavy claims paid out. Many of these have come to light due to whistle-blowers, as well as investigations aimed at identifying the causes of increasing healthcare costs in the country,” Strydom notes.

Types of financial abuse

Fraud is a deliberate act with the intention to defraud someone; where person A is unduly benefited at the expense of person B and the key is intent.

Strydom explains that abuse would include medically unjustifiable claims where a healthcare provider might carry out a valid scan of your leg or appendix, but it’s not justifiable, and there was no good reason to carry out the scan.

“Wasteful expenditure is where the expense is justifiable but unnecessary. For example, there might be a good reason for you to have access to certain medicines, but you would have been fine without that medication. It’s really just wasteful, and using resources that could be more clinically correctly allocated to another medical scheme member,” she says.

However, some “fraudulent” claims arise simply from error. For example, duplicate claims could occur due to system errors or miscommunication between the doctor and the secretary or the billing agency.

“We (Medscheme) pay 40,000 healthcare providers on a monthly basis and accept more than 10,000 claims per day across all 11 schemes, so the volumes are massive.

“Claims are assessed and paid through a set of system rules. Healthcare providers who become familiar with the system rules can take advantage of that to push claims through,” Strydom says.

Greater opportunity

She points out that the opportunity for fraud in healthcare is much greater than, for example, in the car insurance industry. Before a car insurance claim is paid, an assessor will have a look at your car, take photos and assess the damage. There is proof that the car was damaged.

“That level of proof is difficult in the healthcare environment. Healthcare professionals need to be paid before they provide a service, even in the case of hospitalisation or emergency care. This means that medical schemes have to trust medical professionals to be honest and that submitted claims are valid.

“It is only when trends are identified that we start to investigate by calling for patient files and reviewing doctor behaviour,” she says.

Another area where fraud crops up is defined as “rationalisation” — where people want to help each other, but actually commit fraud.

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In a recent example uncovered by Medscheme Forensics, a dentist needed to extract two teeth and put in two dental bridges. The member’s limit only allowed for one bridge for that year and a second bridge would have to be paid out-of-pocket.

“In this case, the dentist did two bridges and then told the member he would claim for one bridge in the current benefit year and the second bridge in the next benefit year. The rationalisation is that you could be doing the two bridges over two years, but you are doing the work in one go and spreading the claim.

“That is ultimately a fraudulent claim because the dentist misrepresented the claim, while the member thinks this is such a helpful dentist,” Strydom explains.

Dr Hleli Nhlapo, managing director for Dental Information Systems, says organised crime syndicates have contributed to a rise in the sophistication of FWA.

“Overall, there has been a big shift towards more organised fraud such as identity theft, where fraudsters use the identities of other providers to submit claims. This was not only on isolated identities, but those of doctors either dead or overseas or across provinces, being used to submit significant volumes of false claims.

“Some cases have also included theft of members’ identities,” Nhlapo says. BM/DM

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