Huffpost Technology
Neil Isford Headshot

Health Care Fraud: Analytics is the RX for $250 Billion in Fraudulent Health Care Costs

Posted: Updated:

It's a staggering amount to think about: Health care fraud costs the economy about $250 billion every year, according to the FBI.

Fraud is a major contributor to the skyrocketing waste plaguing the U.S. health care system. And people bilking the system are coming up with more sophisticated, fraudulent schemes, whether it's through overbilling, charging for services never performed, or even billing for more hours than there are in a day.

According the Institute of Medicine, $2.5 trillion is spent annually on health care in the U.S. So in a system that large, pinpointing fraud is harder than ever using traditional approaches.

Still, the same aspects that make U.S. health care so ripe for fraud -- the fragmentation of care, disconnects in the system between suppliers -- are also what makes it so well-suited for the use of smart technology that can root out fraud.

Because today's smarter analytics systems can do what humans just aren't capable of in a system of this size and complexity, we can now use smarter analytics to track millions of ever-changing pieces of data, from claims to past payouts, or to pinpoint patterns of behavior that point to fraud. And because today's systems can track incoming data in real time, they aren't just reacting after the fact. They can detect fraud as its happening -- before a single dollar is paid out.

North Carolina's Department of Health and Human Services is leading the pack in adopting this new approach. The state began rolling out predictive analytics software to ferret out patterns of waste and fraud in its Medicaid program, which covers two million people. Each year, the department spends $12 billion in handling 88 million claims.

Analytics enables North Carolina to automatically look through tens of thousands of documents and hundreds of millions of pieces of data in mere minutes. As a result, in the first phase of data analysis, the state was able to pinpoint hundreds of millions of dollars in suspicious claims by hundreds of providers, which are now being investigated.

Advances in analytics also mean that today's systems get smarter the more data they're given. As data about past fraud cases are stored in the system, for instance, the system learns to be on the lookout for similar patterns of behavior in the future. The systems can also recommend the best responses to different situations, whether it's a simple letter requesting payment in one case, or a full-blown investigation in another. This can result in better customer service by using a fast-track process for legitimate claims.

At a time when consumers are shouldering an ever bigger burden of the growing health care costs and governments are being forced to cut back services, it seems even more unfair that unscrupulous actors should get away with ripping of the system. Analytics makes sense, even in these lean times of budgetary cuts because even as they've become more sophisticated, they're also more cost-effective.

In fact, health care organizations can't afford not to take advantage of analytics. It's like letting money float out the door when they have the power to put a stop to it.

To learn more about how IBM can help prevent fraud in health care, click here.

From Our Partners