Fraud Prevention – The Tip of the Iceberg

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That's a substantial amount of tax dollars, and it's great to see success stories such as this, which can help lower the overall cost of healthcare. In fact, it was far and away the most money that the HHS has ever recovered.

How did it become so good at cracking down on healthcare fraud perpetrators? There are hard-working individuals on "Medicare fraud strike force teams," but a great deal of credit must also go to the government's new Fraud Prevention System (FPS).

Just last year, the Centers for Medicare & Medicaid Services were allotted about $270 million in funding from the HHS and Congress to combat fraud and waste within the federal healthcare system. According to an annual report (PDF download), the CMS used a portion of the funds to "build on existing fraud prevention activities and implement new advanced technology to ensure that accurate payments are made to legitimate providers for appropriate and reasonable services for eligible beneficiaries of the federal health care programs." The FPS was born from this funding.

The system, which went live in June, uses the same predictive modeling technologies that credit card companies use today.

This is interesting, because it would seem that fraud prevention software has become easier to repurpose for varying types of data and predictive informaton. Previously, these systems were designed and built for a specific purpose, usually in the financial servies industry, but now they are much more flexible and can adapt to fit many different environments.

Much of the problem with implementing fraud prevention systems in other areas had to do with the fact that data was not always stored digitally. And even if it was, it was dispersed in multiple databases and in differing formats. But now that there is a push for digital medical record standards, all the data is beginning to line up, and that makes it very easy to wrap data mining and prediction analytics tools around it.

As a result, you can expect healthcare fraud to be exposed far more frequently in the future thanks to technology that was invented in the financial industry -- and reapplied for a slightly different purpose. Due to the apparent success of the FPS, I expect our government to apply similar systems to other areas where fraud is frequent. One obvious target would be the IRS, but perhaps a similar system has already been implemented, and we just haven't been told.

Just in case, you'd better make sure you have all your receipts for this year's tax season!