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Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
Detecting Healthcare Vendor Fraud Using Data Analysis
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Detecting Healthcare Vendor Fraud Using Data Analysis

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Webinar series from FraudResourceNet LLC on Preventing and Detecting Fraud Using Data Analytics. Recordings of these Webinars are available for purchase from our Website fraudresourcenet.com …

Webinar series from FraudResourceNet LLC on Preventing and Detecting Fraud Using Data Analytics. Recordings of these Webinars are available for purchase from our Website fraudresourcenet.com
This Webinar focused on fraud detection using data analytic software (Excel, ACL, IDEA)
FraudResourceNet (FRN) is the only searchable portal of practical, expert fraud prevention, detection and audit information on the Web.
FRN combines the high quality, authoritative anti-fraud and audit content from the leading providers, AuditNet ® LLC and White-Collar Crime 101 LLC/FraudAware.
The two entities designed FRN as the “go-to”, easy-to-use source of “how-to” fraud prevention, detection, audit and investigation templates, guidelines, policies, training programs (recorded no CPE and live with CPE) and articles from leading subject matter experts.
FRN is a continuously expanding and improving resource, offering auditors, fraud examiners, controllers, investigators and accountants a content-rich source of cutting-edge anti-fraud tools and techniques they will want to refer to again and again.

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  • 1. Detecting Healthcare Vendor Fraud Using Data Analysis April 17, 2013 Special Guest Presenter: Katrina Kiselinchev, CIA, CPA, CFE, CFF Copyright © 2013 FraudResourceNet™ LLC About Peter Goldmann, MSc., CFE  President and Founder of White Collar Crime 101 Publisher of White‐Collar Crime Fighter Developer of FraudAware® Anti‐Fraud Training  Monthly Columnist, The Fraud Examiner,  ACFE Newsletter  Member of Editorial Advisory Board, ACFE  Author of “Fraud in the Markets” Explains how fraud fueled the financial crisis. Copyright © 2013 FraudResourceNet™ LLC
  • 2. About Jim Kaplan, MSc, CIA, CFE  President and Founder of AuditNet®, the global resource for auditors   Auditor, Web Site Guru  Internet for Auditors Pioneer  Recipient of the IIA’s 2007 Bradford Cadmus Memorial Award.  Author of “The Auditor’s Guide to Internet Resources” 2nd Edition  Copyright © 2013 FraudResourceNet™ LLC About Katrina Kiselinchev, CPA, CIA, CFE, CFF       President of Inclusivitie, We Do “SMART” Integration Partner with IDEA Experience across industries, audit, fraud, and value Achieved Value of $5+ Million & ROI of 2000+%, which  included using IDEA’s SMART Analyzer . Adjunct Professor at Georgia State University Specific Fraud in Fixed Asset e.g. Mischaracterized Fixed   Asset v. Expense to Increase Bottom Line.  Copyright © 2013 FraudResourceNet™ LLC
  • 3. Webinar Housekeeping This webinar and its material are the property of AuditNet® and FraudAware®.   Unauthorized usage or recording of this webinar or any of its material is strictly  forbidden. We will be recording the webinar and you will be provided access to that  recording within five business days after the webinar. Downloading or otherwise  duplicating the webinar recording is expressly prohibited. Please complete the evaluation to help us continuously improve our Webinars. You must answer the polling questions to qualify for CPE per NASBA. Submit questions via the chat box on your screen and we will answer them either  during or at the conclusion. If GTW stops working you may need to close and restart. You can always dial in and  listen and follow along with the handout. Copyright © 2013 FraudResourceNet™ LLC Disclaimers The views expressed by the presenters do not necessarily represent the views,  positions, or opinions of FraudResourceNet LLC (FRN) or the presenters’ respective  organizations. These materials, and the oral presentation accompanying them, are for  educational purposes only and do not constitute accounting or legal advice or create  an accountant‐client relationship.  While FRN makes every effort to ensure information is accurate and complete,  FRN makes no representations, guarantees, or warranties as to the accuracy or  completeness of the information provided via this presentation. FRN specifically  disclaims all liability for any claims or damages that may result from the  information contained in this presentation, including any websites maintained by  third parties and linked to the FRN website Any mention of commercial products is for information only; it does not imply  recommendation or endorsement by FraudResourceNet LLC Copyright © 2013 FraudResourceNet™ LLC 5
  • 4. Learning Objectives       Who are the Most Common Dishonest Healthcare Providers New Fraud Risks Under Obamacare Case Studies:  Ways Vendors Rip Off Hospitals, Clinics and Other Providers How Insiders Collude with Vendors to Embezzle Funds, Divert Inventory  and Steal Confidential Medical Data Red Flags of Healthcare Billing Schemes, Sham Vendor Frauds, Drug  Diversion Schemes and Other Hugely Costly Scams Proven Data Analytics for Detecting Indicators of Healthcare Fraud Copyright © 2013 FraudResourceNet™ LLC 6 Agenda           Introduction The Auditor’s Role Fraud State of the Union Most Common Dishonest Healthcare Providers IMA Bleeding Company Case Planning, Data Gathering & Software Introduction Discovery with DA: Is There Fraud at IMA Bleeding Red Flag Detection & Collusion  Finding Healthcare Fraud & Next Steps New Fraud Risks Under ObamaCare Copyright © 2013 FraudResourceNet™ LLC 7
  • 5. The Auditor’s Role IPPF Standard 1210.A3  Internal auditors must have sufficient  knowledge of…available technology  based audit techniques   to perform their  assigned work Copyright © 2013 FraudResourceNet™ LLC IIA Guidance – GTAG 13 Internal auditors require appropriate skills  and should use available technological  tools to help them maintain a successful  fraud management program that covers  prevention, detection, and investigation.  As such, all audit professionals — not just  IT audit specialists — are expected to be  increasingly proficient in areas such as  data analysis and the use of technology to  help them meet the demands of the job. Copyright © 2013 FraudResourceNet™ LLC
  • 6. Professional Guidance Copyright © 2013 FraudResourceNet™ LLC Fraud State of the Union Source: 2012 ACFE Report to the  Nations Copyright © 2013 FraudResourceNet™ LLC
  • 7. Fraud State of the Union Source: 2012 ACFE Report to the  Nations Copyright © 2013 FraudResourceNet™ LLC Healthcare Overview The prevention, treatment, and management of  illness and the preservation of mental and physical well‐being through the services offered by the medical and allied health professions. Copyright © 2013 FraudResourceNet™ LLC
  • 8. Polling Question 1 Frequency of Healthcare Cases in the Latest ACFE  “Report to the Nation” A. B. C. D. 6% 30% 15% 2% Copyright © 2013 FraudResourceNet™ LLC Most Common Dishonest Providers         Durable Medical Equipment (DME)  Pharmaceutical Companies Third Party Billing Companies Ambulance Service Providers Diagnostic Laboratories  Organized Crime Pharmacies MD’s and other care providers Copyright © 2013 FraudResourceNet™ LLC
  • 9. Data Analytics for Fraud: Tools You Can Use Data Analytics       Traditional Auditing Large Amounts of Data  Identify Red Flags Faster Increased Coverage Determine Trends Continuous Analysis Process Improvement     Small Amounts of Data Delay in Identifying Red Flags Decreased Coverage Harder to ID Trends Show First View of IDEA Copyright © 2013 FraudResourceNet™ LLC 16 Healthcare Fraud: The Big Picture  Healthcare Fraud ranges  between $125 billion and $175  billion annually in Healthcare  (Thomson Reuters).  Every $2 million invested in  fighting health‐care fraud  returns $17.3 million in  recoveries, court‐ordered  judgments, plus bogus claims  that weren’t paid and other anti‐ fraud savings. (National Health  Care Anti‐Fraud Association,  2008) Copyright © 2013 FraudResourceNet™ LLC Source: www.fbi.gov
  • 10. Vendor Fraud Schemes Reminding Yourself What Exists  Bid Rigging – A commercial contract is promised to one party even  though for the sake of appearance several other parties involved.  Price Fixing ‐ agreement between participants on the same side in a   market to buy or sell a product, service, or commodity only at a fixed   price to control pricing.   Market Division ‐ Competitors divide markets among themselves. In  such schemes, competing firms allocate specific customers or types of  customers, products, or territories among themselves.   Vendor Masking ‐ tricks e.g. shell companies to hide their true identity.  Inside Job ‐ current or former employees collude with vendor to approve  and/or pay overstated or false invoices for personal gain.  False Claims – billing for more expensive equipment and billing for  supplies never received Copyright © 2013 FraudResourceNet™ LLC Vendor Fraud Schemes Reminding Yourself What Exists  Bribery – involves bribes either directly or indirectly e.g. masking through  classification type in order to gain service / business. Corruption Perception Indexes are good source for countries.  Kickbacks – typically external sources provide kickback for selection of  services e.g. kickback. Copyright © 2013 FraudResourceNet™ LLC
  • 11. Healthcare Vendor Fraud Schemes ‐  Flying Under the Radar  criminals avoid detection by using “proven”  techniques for blending in with legitimate invoices, vendors and payments.  Organized Crime Billing Schemes ‐ Sophisticated groups of criminals take  a savvy, organized approach to defrauding your company. Medicare  Examples of Increased Fictitious Companies Health care fraud, waste and abuse  add roughly 3‐10 percent to all  healthcare spending.  ABC News Video Copyright © 2013 FraudResourceNet™ LLC Healthcare Vendor Fraud Schemes  Provider Utilization Rates >  Peers   Unlikely or Unrelated  Procedures  Above Average Patient Volume  and/or Procedures  Unbundling Procedures for  Billing for + Reimbursement  Patient Name Does Not Equal  Insured’s Name Copyright © 2013 FraudResourceNet™ LLC
  • 12. Case Study: IMA BLEEDING Initial Contact: IMA Bleeding Co. gets an employee tip that they should  look at two vendors that recently got approved for  Medicare Billing. The tipster states there is massive  overbilling going on for non‐eligible expenses.      “Concerns about Unnecessary Diagnostic Tests & Kickbacks”  “We Need a Data Analysis Expert… .. Massive Data” Copyright © 2013 FraudResourceNet™ LLC Polling Question #2 For Every $2 Million Invested in Fighting  Healthcare Fraud, How Much is Estimated to Be  Returned? A. B. C. D. $17 million $68 billion $5 Million $100K Copyright © 2013 FraudResourceNet™ LLC 23
  • 13. IMA Bleeding Co  No Pre‐Screening of New Co. Existence for Medicare  Billing   No Comparison of Vendor Address v. Employees  No Comparison of Managed Care Rates v. Billings  No Comparison of Budget v. Spend . Copyright © 2013 FraudResourceNet™ LLC Software Overview & Introduction  Set Working Folder  Import Data  Check Control Totals Copyright © 2013 FraudResourceNet™ LLC
  • 14. Client Communication: Planning for Healthcare Fraud      Walk‐through of Entity Approvals, Contracts, Rates, and Service Types  Procure‐to‐Pay Cycle  Complete Audit Plan with Data Analysis Incorporated Include  Different Types Alongside Consideration of Fraud Comparisons to Similar Services & Pricing Copyright © 2013 FraudResourceNet™ LLC Data Gathering for Data Analysis Request All Meta Data Fields  & Files Billings, Employees, Budgets, & Rates Microsoft Excel 97-2003 Worksheet Copyright © 2013 FraudResourceNet™ LLC
  • 15. Polling Question 3 What Are Three Steps to Start Data Analysis? A. B. C. D. Set Working Folder, Import, Check Control Totals Set Working Folder Set Working Folder, Import, & Begin Tests Import & Begin Tests Copyright © 2013 FraudResourceNet™ LLC Discovery with Data Analysis: Is There Fraud at IMA? Initial Audits to Perform:  Vendor Locations  Address v. Employee  Stripping Address  Contracts:  Billings v Rates  Billings v Patients  Billings v Budgets  Duplicates Copyright © 2013 FraudResourceNet™ LLC
  • 16. Discovery with DA: Spend Audits to Perform: Vendor Address Match Summarize by Billings Strip Addresses in Both Files Join Files by Address (c) Red Flag #1: Three Vendors  Match Employee Addresses Copyright © 2013 FraudResourceNet™ LLC Polling Question 4 Which Tests Should IMA Run Initially  to Identify Red Flags? A. B. C. D. Billings v. Rates, Patients, Budgets, and Duplicates Recalculate Depreciation COGS Transfer to Sale Only Address v. Employee Copyright © 2013 FraudResourceNet™ LLC
  • 17. Discovery with DA: Duplicates Red Flag #2: Numerous Duplicates, Odd  Amounts & Quantities  Copyright © 2013 FraudResourceNet™ LLC Discovery with DA: Billings v. Rates, Patients, Budgets Red Flag #3: Drug A Mismatch on Rates Red Flag 4: No Match on Patient 125 Red Flag 5: Spend v. Contract Overages Copyright © 2013 FraudResourceNet™ LLC
  • 18. Total Issues Found & Next Steps 1)  Complete Summary of Data & Findings a) Total by Each Type of Discrepancy b) Aggregate Discrepancy 2)    Determine Additional Tests to Run & Perform 3) Discuss Findings with Owner Initially & Recommendations 4) Complete Interviews with Employees  5) Review Gaps & Control Deficiencies & Provide Recommendations  6) Recommend Management Review for Cost v Benefit & Implement ASAP 7) Determine if Client has Fraud Insurance Rider.  If not, recommend. 8) Contact Insurance Carrier (if applicable) & Begin Claim Process. 9) Contact Authorities & File Report. 10) Determine if Prosecution is Viable e.g. Dollar Amount, Management, etc. 11) Complete Report (See ACFE.com)  12) Complete Supporting Doc for Insurance Co. & Authorities Copyright © 2013 FraudResourceNet™ LLC ObamaCare Fraud Concerns  The Obama Administration’s bonus system for insurers participating in  Medicare Advantage, the private‐market alternative to the government’s  traditional health insurance program for the elderly, has been criticized  by Republicans as a political giveaway and by the Government  Accountability Office as illegal.  The government rates every Advantage plan from one to five stars,  depending on how they perform on a range of tests including measures  of patient care, what proportion of members receive flu shots, and  measures of customer satisfaction such as complaints to Medicare. More  stars are better.  Since 2011, when the bonuses first became available, the average star  rating for plans that offer drug coverage — the most popular type — has  increased from 3.18 to 3.66  Legitimate or Not? Manipulation to Get Bonuses… Copyright © 2013 FraudResourceNet™ LLC
  • 19. Polling Question 5 Which of the following is/are Red Flag(s)/  Finding(s) Identified in IMA Bleeding? A. B. C. D. Improper Depreciation Calculated No Match On Patient 125, Duplicates, Budget & Pricing Overages Terminated Employees Receiving Paychecks No Match on Patient 125 Only Copyright © 2013 FraudResourceNet™ LLC Questions?  Any Questions? Don’t be Shy! Copyright © 2013 FraudResourceNet™ LLC
  • 20. Thank You! Website: http://www.fraudresourcenet.com Jim Kaplan FraudResourceNet™ 800-385-1625 jkaplan@fraudresourcenet.com Peter Goldmann FraudResourceNet™ 800-440-2261 pgoldmann@fraudresourcenet.com Katrina Kiselinchev Inclusivitie, LLC 832-236-4778 katrina@inclusivitie.com http://www.inclusivitie.com Copyright © 2013 FraudResourceNet™ LLC Coming Up….  Anti-Fraud Professionals’ Role in Building an Anti-Fraud Culture, April 23, 2013  Detecting, Preventing and Auditing for Fraud  Using Excel, May 7, 2013. Details at: http://www.fraudresourcenet.com Copyright © 2013 FraudResourceNet™ LLC

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