GOVERNANCE: Opportunities to Improve Controls over Medical Claim Payments

We found that the company appears to be identifying only a small portion of potentially fraudulent medical claims made by individual medical service providers. Our work indicated that 14 percent of claims submitted by physicians, nurses, physical therapists and other individual providers from 2013 to 2015 were potentially fraudulent, which is significantly higher than the 1 percent of claims identified by the company’s primary claim administrator.

Additionally, we found that the company’s contracts with its claim administrators do not include key fraud prevention practices used in the private- and public-sector such as performance guarantees to help ensure the administrators perform key obligations at or above the established threshold under the contract.<

As a result, we recommended that the company develop a plan that:

• requires claim administrators to design and implement fraud detection controls tailored to the company’s medical plan,
• includes performance guarantees in claim administrators’ contracts to prevent and detect fraud,
• requires regular assessments to gauge the effectiveness of claim administrators’ fraud prevention and detection controls, and
• requires systematic analysis of medical claims data for indicators of fraud.

Additionally, we recommended that the company review the questionable medical claims and seek recovery of $23.4 million in potential improper payments identified in the report.

The company agreed with all of our recommendations and described steps it would take to implement them.