Tag Archives: case management

Tools for Fighting Fraud Come of Age

Insurance fraud, that ever-present nemesis of claims professionals, has a new opponent. A technology triple threat—the Internet, extensive and accessible databases and the pervasiveness of social media—has come of age, and the result is an increased exposure of workers’ compensation fraud and a rise in prosecutions.

As with many industries, the tools used in fighting fraud have evolved over the years, and today’s high-tech resources are completely different from the tools employed a mere 20 years ago.

In the pre-Internet era, employers and insurance industry professionals who suspected potential workers’ compensation fraud had limited, and often expensive, options to gather evidence. Even the initial paperwork was more cumbersome. The adjuster would first complete a hand-written referral form requesting investigative services, which would slowly pass through the fax machine to materialize in the investigator’s office. That’s much different from today’s data integration of claim systems with investigative partners, where a click of a button auto-fills the referral form, and the complete claim file is populated into the investigative company’s web-based case management system.

For surveillance conducted pre-Internet, the investigator would review the Thomas Brothers map, load the large VHS video camera and extra batteries in the van and drive to the subject’s last known residence to roll the dice on filming the correct person. Employers were not able to email photos of employees, and there were no online social networks to locate vacation photos and other important information.

Going From Print and Tape to Digital

Today’s technology allows those fighting fraud to conduct a more comprehensive pre-surveillance investigation than they could have been imagined just a few years ago.

Mapping technology provides a clear visual of the subject’s residence and surrounding neighborhood. This allows the investigator to create a detailed surveillance plan including routes, local and covert tail opportunities and other strategies. Online database searches, Department of Motor Vehicle records and social networking searches provide a plethora of information. Additional tools such as GPS tracking and video streaming also have improved the success rate of surveillance.

Today’s video cameras do not resemble their older brothers from the ’90s. The heavy cameras of the past were best used with a tripod to hold the weight, making quick maneuvers difficult. Getting out of the vehicle to obtain film from an on-foot pursuit was extremely challenging. A large duffle bag with a hole cut in the end for the lens was hard to keep clandestine approach. And covert cameras lacked the quality needed to prove identity. Today’s compact, powerful, digital HD video cameras provide high-quality video and fit comfortably in one hand. Additionally, current covert cameras are undetectable—the camera lens can easily be part of a hat, a shirt button or a keychain. Significantly, these tiny video cameras can capture clear footage almost on par with film obtained using a standard video camera.

In addition to the VHS video camera, the tools of the trade back then included a pager, a heavy cellular phone with a large antenna, a stack of phone books, a shoebox full of maps, several proven pretext scenarios and, most importantly, a Rolodex. Information that we now find on the Internet certainly was obtainable before the Internet-era, but it had to be acquired with different and often creative methods.

Digging for Information

While investigators today have Internet connection in their vehicles and can quickly conduct database and social network searches while onsite, the pre-Internet investigator’s most valuable tool was relationships, as information was shared by people, not technology. The investigator often had little information about the subject upon initiation of the investigation and gathered details the old school way—by digging.

Investigators could be found reviewing records at the voter registration office or scanning microfiche at the court to ascertain critical information. They spent a lot of time standing in lines at public agencies and searching through endless records stored in large ledgers, microfiche or index card catalogs. The information found in public records was invaluable—current and former addresses, real property data, encumbrances, marriage licenses, divorce records, birth certificates, bankruptcies, criminal records, traffic tickets, tax liens, civil lawsuits, evictions, business licenses, professional licenses and more.

While this information was vital, it was tedious work retrieving it, especially if the subject had a common name or a maiden name or aliases. Successful investigators had to be not only good at investigation, they also had to be successful at establishing connections to build a Rolodex of contacts. An effective investigator leveraged strategic connections to successfully and quickly gather information. Making connections with the people who worked in the records departments of courts, law enforcement agencies, recorder’s office, voter registration, licensing bureaus and the like, then gathering phone numbers that rang directly to desks, was essential to efficiently obtain vital information. Likewise, networking with fellow investigators in other areas to trade resources saves time.

Gaining Public and Private Details

Public records have always been a critical source for identifying information, financial information, business records, criminal records, civil litigation records and the like. However, those records did not provide the personal insight that we can find on the Internet.

Today, a search of social networking can yield information, insight and often photographic evidence of a subject’s habits, activities, interests, schedules and behavior. If obtained legally and ethically and stored appropriately for chain of custody, this online evidence can be submitted to medical providers and the Workers’ Compensation Board and used as evidence in Superior Court, including in criminal cases of workers’ compensation fraud.

To learn personal information pre-Internet, one needed connections and creative sleuthing talent. Delivery companies, utilities, contest and sweepstakes promoters, magazines, debt collection agencies, credit reporting agencies, retail and catalog ordering companies often made additional revenue by selling their customers’ personal data.

Today, calling people to obtain information has been replaced with Internet searches. Several companies provide database services, including instant access to credit reporting agencies, public records, utility company records and other information. Now, what previously took many hours, if not days, of phone calls and in-person searches and cost a significant amount is accomplished in mere seconds.

Pretexting—the practice of presenting oneself as someone else to obtain private information—is one strategy that has carried over from pre-Internet days. Indeed, it was all but impossible to conduct a successful investigation without it before the Internet, and it remains useful today. Pretexting is legal in many states, and investigators have historically used it to obtain needed information. A successful pretext call results in a willingness by the subject or other source to share information and, if done correctly, leaves no footprint behind, so the people are never aware they spoke to an investigator.

The successful investigator uses a combination of old and new to navigate today’s complex world of insurance fraud. Pretexting still works in some cases, relationships always will matter and technology continues to evolve and to provide even better data. Workers’ compensation fraud will, unfortunately, always be with us. However, old, new and yet-to-be developed techniques will bring that fraud to light, resulting in a better system for us all.

See Darlene’s interview here.

Pointers on Managing GRC Issues

MetricStream has shared with us a November 2014 report from the analyst firm Forrester: Predictions 2015: The Governance, Risk and Compliance Market Is Ready For Disruption. (Registration required.)

I have had serious issues in the past with Forrester, its portrayal of governance, risk management and compliance (GRC), its assessment of vendors’ solutions and its advice to organizations considering purchasing software to address their business problems.

However, Forrester does talk to a lot of organizations, both those that buy software as well as those that sell it. So, it is worth our time to read their reports and consider what they have to say. I’m going to work my way through the report, with excerpts and comments as appropriate.

“…the governance, risk, and compliance (GRC) technology market is ripe for disruption.”

I have a problem with the whole notion of a GRC market. For a start, the “G” is silent! The analysts seem to forget that there are processes, each of which can be enabled by technology, to support governance of the organization by the board and others. For example, there is a need to enable the secure, efficient and useful sharing of information with the board – for scheduled meetings and throughout the year. In addition, there are needs to support whistleblower processes, legal case management, investigations, the setting and cascading of business objectives and goals, the monitoring of performance and so many more.

In addition, organizations should not be looking for a GRC solution. They should instead be looking for solutions to meet their more critical business needs. Many organizations are purchasing a bundle of GRC capabilities but only use some of what they have bought – and what they do use may not be the best in the market to address that need.

Finally, I have written before about the need to manage risk to strategies and objectives. Yet, most of these so-called GRC solutions don’t support strategy setting and management. There is no integration of risk and strategy. Executives cannot see, as they review progress against their strategies and objectives, both performance progress and the level of related risks.

“A corporate risk event will lead to losses topping $20 billion.”

What is a “risk event”? This is strange language. Why can’t Forrester just talk about an “event” or, better still, a “situation”?

I agree that management of organizations continue to make mistakes – as they have ever since Adam and Eve ate the apple. Some mistakes result in compliance failures, penalties, reputation damage and huge losses. I also agree that the size of those losses continues to rise.

But what about mistakes in assessing the market and customers’ changing needs, bringing new products and services to market or price-setting (consider how TurboTax alienated and lost customers)? I have seen several companies fall from leaders in their market to being sold for spare parts (Solectron and then Maxtor).

Management should consider all potential effects of uncertainty on the achievement of objectives.

“Embed risk best practices across the business…. Risk management helps enhance strategic decision-making at all organizational levels, and, when company success or failure is on the line, formal risk processes are essential.”

The focus on decision-making across the enterprise is absolutely correct. Risk management should not be a separate activity from running the business. Every decision-maker needs to consider risk as she makes a decision, so she can take the right amount of the right risk.

“Read and understand your country’s corporate sentencing guidelines.”

This is another excellent point! Unfortunately, the authors didn’t follow through and point out that the U.S. Federal Sentencing Guidelines require that organizations take a risk-based approach to ensuring compliance; those that do will have reduced penalties should there be a compliance failure.

“Build and maintain a culture of compliance.”

Stating the obvious. It is easy to say, not so easy to accomplish.

“Review risks in your current register and add ‘customer impact’ to the relevant ones.”

All the potential consequences of a risk should be included when analyzing it. Rather than “customer,” I would include the issues that derive from upsetting the customer, such as lost sales and market share.

Further, it’s not a matter of reviewing risks in your risk register. It’s about including all potential consequences every time you make a decision, as well as when you conduct a periodic review of risks. Risk management should be an integral part of how decisions are made and the organization is run – not just when the risk register is reviewed.

Forrester makes some comments and predictions concerning GRC vendors. I don’t know whether they are right or wrong. However, I say again that organizations should not focus on which is the best GRC platform. They should instead look for the best solution to their business needs, whatever it is called.

I do agree with Forrester that there are some excellent tools that can be used for risk monitoring. They should be integrated with the risk management solution, with ways to alert appropriate management when risk levels change.

What do you think of the report, the excerpts and my comments?

Should we continue to talk about GRC platforms? Is it time to evaluate risk management solutions? How about integrated strategy, performance and risk solutions?

[By way of complete disclosure, I have a relationship with a number of vendors of “GRC” solutions, including MetricStream and Resolver. I no longer have a relationship with SAP.]

Did the Work Comp Nurse Make It Worse?

Case management nurses can unwittingly hinder the control of workers’ comp claims. Consider the perfect storm of “assumptions” leading to disaster: An adjuster receives a claim requiring extended treatment, makes the standard screen-clicks to assign a nurse and logs the claim in the diary. The employer assumes the case is being scrutinized and treatment is being managed. The adjuster assumes it is okay to ignore the case for a while. The nurse takes the initial claim information at something approaching face value.

In these situations, many nurses act but don’t interact. They assist with referrals and expedite the collection of medical information. Unfortunately, they may not use their clinical acumen on critical issues like compensability, diagnosis, causal relationship, return to work (RTW) and treatment plans. We should note that nurses must balance caseloads and respect their company’s requirements for speed. As such, they might feel justified in expediting what appears to be a common assignment.

When it comes to referrals, a well-intentioned nurse can cause disaster. I have experienced all of the following: a claimant alleging breathing issues referred to a “sick building expert”; a claimant with negligible head trauma to a “closed head injury specialist”; a claimant alleging jaw pain to a “TMJ dentist”; and the ever popular referral of a claimant with mysterious pains to a “chronic pain specialist.”

These real examples all involved highly questionable claimants. Needless to say, medical expert “hammers” saw perfect “nails” in each claimant and fully validated the conditions and the causal relationship each alleged. By the time of the next adjuster diary, it was all over but for the increase in reserves.

The claimant can steal control of a case and contrive subjective medical issues if a nurse simply collects doctor reports and fails to interact. Countless WC case files exist where medical notes are simply pasted in by the nurse. (As far as I am concerned, this indicates adjuster/employer failure and not necessarily a poor nurse.)

I have witnessed nurse case managers decline to intervene in RTW efforts, and the corporate nurse care management entity can, conveniently, relieve itself of RTW responsibilities without affecting its fixed fee. I would argue that some level of RTW support from a nurse can and should exist on any given case in any jurisdiction.

Quick Tip: You and Your Adjuster Must Engage and Direct Nurse Assignments

A nurse should be vital in selecting providers for specialist evaluation or independent medical exams (IMEs). However, the nurse needs the insight and outlook that can only be gained by communication and planning. Engage the nurse and explain all the case issues and concerns. Compare providers and agree on who might be most appropriate. Agree on the specific background, insight and questions to be given to this provider. An early conference call should be mandatory.

The nurse should be an active member of the claim team, including adjuster, employer, defense counsel, Medicare medical savings account (MSA) vendor and, in certain cases, the special investigative unit (SIU). Nurse contributions should be vital to team decisions and strategy.

Make certain the nurse case management fee-structure allows extended work, as a claim might require. Reconfigure if necessary to ensure nurses can spend adequate time where needed.

A nurse should be asked to evaluate, comment and make suggestions based on all medical info collected. This insight can be used by the team to make tactical and strategic decisions.

A nurse is most useful for assessing the claimant on a personal level. The nurse should be sought for oral comment on impressions and gut feelings based on interaction with the claimant. Written assessments, which are subject to discovery in legal proceedings, need to be subtle and are not as meaningful. Therefore, conference calls on an interim basis are critical for gaining powerful nurse insight.

Nurses should absolutely support RTW efforts, either at most by collecting potential jobs from the employer and sharing these directly with the employee and doctor or at minimum by reminding the doctor that the employer has a RTW program and expects participation. Somewhere along this range of support should fit any jurisdiction.

Nurses are great tactical tools against unwieldy claimants. They can relay important details and extraneous issues to a physician that can affect causation determinations and reliability assessment of subjective symptoms. Nurses give doctors an “option B” of facts and background when doctors otherwise would only consider “option A,” as relayed by a claimant. Without an “option B,” doctors are more likely to give a claimant benefit of the doubt.

Most important: The power of case management nurses is wasted if you do not provide specific insight, direction and expectation for each claim assigned.

Surge in Work Comp Services Is Ending

The workers’ compensation insurer is for many the centerpiece of a mature industry. Injury frequency almost constantly declines. Insurers earn modest but fairly steady returns on equity, with little risk of insolvency. Market shares generally do not change much. Careers are largely very predictable.

Within this industry, however, specialized services as an extension of claims management grew since 1990 from about $4 billion in total costs to about $18 billion today. This service universe expanded dramatically and changed repeatedly in products, organization and leadership.

Let’s review this evolution and ask if two decades-plus of growth is coming toward an end.

Medical bill review, case management, subrogation services, transportation, investigation, pharmacy management – the list of services is long. With annual growth of all specialized services at the 15%-plus level, successful entrepreneurs have been highly rewarded.

Like matryoshka dolls, spending on a direct benefit (such as surgeries) requires bill review; inside that, a more specialized review for implants; and then more specialized responses to new state regulation and court decisions.

Claims payers account for these services as “loss adjustment expenses,” which divide into “unallocated” and “allocated” categories.

Rick Sabetta, a managing principal with Risk Navigation, a claims consultancy, says that as specialized services grew, insurers and third-party administrators began to reposition some costs as “allocated.” As a result, they, but more likely vendors, could charge the services to the claims file.

Sabetta told me that some insurers sought to improve the bottom line by reducing or completely removing the unallocated factor, even to the point of insurers’ outsourcing their entire claims operation to TPAs. He said, “It is far less expensive to farm the claims out to the TPA than it is to attract, hire, train and manage a claim staff.”

To an investment banker, the outsourcing universe is an engagingly complex version of a supply chain management exercise given to MBA students. The entrepreneurs compete through superior information technology, superior management talent and guiding more volume through a scalable structure.

Since the 1980s, the supply chain challenge always has reinvented itself into something larger. That’s why the bankers come back often, confident of liquidating their investments in a few years at a profit by selling them to other bankers.

The 1980s saw the rise of case management, and national expansion by vendors such as Intracorp, CRA, Genex and Corvel.

The 1990s saw the introduction of bill review firms, with their complicated coding systems. State-mandated closed networks started to emerge. So did utilization review. Major state reforms, in Florida in the 1990s and Texas and California in 2004-2005, effectively educated the payer community that it could – and legally had to – commit to using specialized services.

In the 2000s, pharmacy benefit management arrived.

Regulators rarely demand transparency in the outsourcing universe. For example,  physical therapy is today heavily influenced by proprietary physical rehab networks, but these networks do not share their experience publicly. Pharmacy benefit managers publish about their experience, but only voluntarily.

This universe of firms that arrange on behalf of claims payers for physical therapy, dental care, translation, Social Security disability awards, etc., arose from a choice claims payers made to outsource. But would Walmart or Home Depot have outsourced management of their supply chain to vendors to anywhere near this extent?

Prospects of double-digit growth in the outsourcing universe may be declining. Frequency of claims continues to decrease. There may not be a new major class of claims operations for payers to outsource. Some large states could lay down mandates that create demand, such as new utilization review or preferred provider organization rules, but the bigger states have mostly done that already.

I think we are going to see more of a Walmart culture in how the supply chain is controlled.

This article was first published in workcompcentral.

The Fallacy of ROI as a Measurement Tool

How often do you see ROI (Return on Investment) being used by managed care service providers to promote the financial benefits of their product? “ROI 10 to1” says one company. “Our ROI is one of the highest in the industry,” says another. But is having a higher ROI a good thing, and should you rely on it when evaluating a PPO, case management or medical bill review company? While ROI is pertinent for gauging management effectiveness in a capital intensive business, ROI is a misleading indicator in the managed care service industry and I’ll explain the reasons why.

Medical bill review companies, PPO networks and case management companies have long used ROI to sell their products. ROI means “Return on Investment.” It’s a common financial ratio used to gauge management effectiveness. Correctly used, it relates net income to a measure of investments entrusted to management – specifically, the relationship of total assets to net income generated by these assets.

The correct ratio would read:

True ROI takes into consideration assets, other investment income, debt and accounting considerations where there has actually been an “I” or investment made, to which the investors are looking for their “R” or return. Not the case in workers compensation managed care though, and therein lies the risk of relying on it.

When you purchase the services of a medical bill review, PPO or case management company, you pay a fee for those services. That’s it (some will say “what do you mean that’s it, isn’t that enough?). You’re not making an investment in your service provider in the true sense of the word, and you’re certainly not being paid interest or benefiting from depreciation. You pay a fee and you get a service that hopefully saves you money. So to start off with, there is no “I.” There is only an “F,” for fee. So I guess in this day and age of correctness, we should change the acronym to “ROF.” That certainly would more accurately reflect the ratio, but does it improve the ratio’s appropriateness as a value measurement? NO, it doesn’t.

Let me explain by way of example:

Company A

Provides medical bill review services and claims it saved a client $250,000 off their medical bill charges and invoiced the client $25,000 in fees. The ROI (really ROF to be correct, but you get the point) would be 10 to 1, right? ($250,000 in savings; $25,000 in fees; divide the savings by the fee and you get 10 to 1). The net savings to the client – savings less fees is $225,000.

Company B

Provides medical bill review services and claims it saved their client $400,000 with a similar program (more about what accounts for these savings differentials in my next position paper entitled “Bill Review Ain’t Bill Review, No Matter What They Say”) and invoiced the client $50,000 ($25,000 more than Company A). The ROI therefore is 8 to 1 – lower than Company A’s ROI of 10 to 1.

But look at the difference in net savings, which is what all buyers should look for with any managed care product. Company B’s net savings is $350,000 ($400,000 less the fee of $50,000), $125,000 MORE than Company A’s, but with a lower ROI. Any buyer of managed care services would be more than happy to pay an extra $25,000 in fees to have an extra $125,000 in the bank – it’s a no brainer. But if you were focused on ROI, as some managed care companies would like you to be, you would have lost out big.

I have long felt that ROI is a false indicator in the managed care business and should not be relied on as a measurement tool for effectiveness. If used, it should only be when comparing two similar service providers, offering the SAME savings but a different fee. But then, you wouldn’t need a ratio to help you choose the right company, just look at the net savings. Throw ROI out, and look at net savings. After all, isn’t that the bottom line?