Fraud analytics set to reshape private healthcare
Big data analytics can now identify operational inefficiencies and potentially fraudulent claims with great accuracy. That is going to seriously affect healthcare services, because the fraud stats in medical transactions worldwide are breathtakingly large. Take Singapore. Guess what percentage of scripts written in Singapore are potentially incorrect. And what about China Go on – guess!
Fullerton’s data analytics tool suggests 20% of all scripts written in Singapore are in some way incorrect. That includes mild incidents, where the doctor has over-prescribed the number of pills in a course of treatment, but on some occasions it also includes, systematic fraud. In fact, Ted Minkinow, chief information officer at Fullerton, believes that in total, fraud, including upcoding and overtreatment activities, accounts for at least 10% of healthcare costs in Singapore.
The significance of this is that Singapore is a clean country – it comes in at seventh worldwide in the Transparency International Corruption Index – ahead of the Netherlands and the UK.
Fullerton is now going to start crunching the numbers for neighbouring nations in SE Asia, where the total cost of fraud could well be in the order of 30-40% of total healthcare costs.
That figure would come as no surprise to a big insurer which is active in China. It has found eye-popping levels of fraud there. “It is systematic among doctors but also at group level. We see everything from fictitious patients to overtreatment. You would not believe the levels,” said our contact at the insurer .
We think it is only a matter of one or two years before payors or nation states start applying these same big data analytics to other regions. Take the GCC. Here one of our contacts told us that most of the major hospital groups are best described not as healthcare providers, but as “highly efficient ATMs designed to extract as much money as possible from insurers by maxing out policies”.
And don’t get smug if you are sitting in Europe or the USA.
German courts are awash with cases as statutory insurers dispute costs with hospital groups who typically insist on inpatient stays and treatment and have a reputation for upcoding.
As for the USA, in 2013 Procedia Technology estimated that 25% of revenue, that’s $700bn out of $2.7trillion, is lost to fraud, waste and abuse. An academic paper, published in October 2015, identified 25 types of medical fraud and reckoned it was more like a third or $1.3trillion. To put these figures into perspective, you could provide every American with UK NHS healthcare for just $800bn (not that most Americans would thank you for that, although Brits do live a year longer on average).
We think that CEOs with foresight should be putting their operations through the self-same microscope now. How much of what you do today would pass a rigorous fraud test? Private equity investors should be asking themselves “what would be the reputational damage if our investment could be portrayed as engaging in massive, systematic fraud?”.
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
