Did COVID lead to a telehealth fraud boom?

Underwriters' fears not realised, but some fraudsters made hay

Did COVID lead to a telehealth fraud boom?

Insurance News

By Jen Frost

When countries locked down for the pandemic, telemedicine use boomed, sparking fraud fears. With the technology likely here to stay, Insurance Business asked whether it has enabled a spike in bad behaviour.

Insurers had been expecting a more gradual move towards telemedicine, but the pandemic spurred a rapid uptake.

“Whereas telehealth was viewed with scepticism, more so pre-COVID, the advent of the pandemic itself brought telemedicine more into the mainstream,” said John Trovinger, director of client success for Verisk’s claims anti-fraud solutions group.

“Some might even argue that for certain types of medicine it’s one of the preferred methods for seeing a provider.”

In the UK, 99% of GP practices now have access to video consultations, up from 10% before COVID. Telemedicine use in the US was eightfold higher in Q4 2021 than Q4 2019, the last full pre-pandemic quarter, according to Verisk data.

The global telehealth industry could swell to be worth US$224.8 billion by 2030, according to 2021 analysis by Canada headquartered Precedence Research. North America may be the largest market, but Asia-Pacific is the fastest growing, the firm said.

Why the pandemic drove telehealth fraud fears

It was under pandemic disruption that use soared – at its peak, telemedicine use in the US in Q2 2020 was up 21 times (or 2,100%) on Q4 2019, Verisk’s data showed – as healthcare providers looked for ways to serve and assess people without coming into physical contact. Private telehealth claims shot up 2,398% from November 2019 to November 2020, FAIR Health figures showed.

Singapore, Indonesia and Australia all saw telemedicine use surge as the pandemic took hold, according to a Bain & Company report. In China, where the virus was first discovered, usage of Ping An Good Doctor rose 900% in January 2020.

In the US, where a large private health industry can make for an attractive arena for scammers and fraudsters, insurers had concerns as society withdrew and the technology became more important. The country was not alone in its worries; a COVID-19 fraud briefing paper by the Insurance Bureau of Canada warned that telemedicine fraud would be “more difficult to identify and investigate than traditional medical fraud”, and harder to litigate around.

When the Coalition Against Insurance Fraud, a US group, held a COVID-19 webinar with a large telehealth component on March 31, 2020, more than 3,000 people tuned in.

“It turned out to be the largest anti-fraud gathering ever, probably in world history,” said Matthew Smith, Coalition Against Insurance Fraud executive director.

COVID-19 supercharged telehealth use and forced providers to catch up fast. The industry feared that scammers and fraudsters would look to take advantage of “holes” and that a very small percentage of “petrified” practices might look to underhanded means to survive COVID cash flow issues.

“Everyone knew in March of 2020 that telehealth was coming, but it was anticipated to be a 10-year cycle,” Smith said.

“Due to COVID-19, that 10-year cycle collapsed into some would say 10 weeks - but in reality, it was more like 10 days for an entire industry to change. The key fact is the insurance industry, nor consumers, nor doctors – no-one was prepared to ramp up telehealth that quickly in the United States.”

How much does telemedicine fraud cost?

One estimate, according to the Coalition of Insurance Fraud, is that US telemedicine fraud could be costing US$25 billion to US$35 billion a year. This is calculated based on telehealth having a usage rate of between 21% and 27% and applying it as a proportion to an annual healthcare fraud estimate of US$105 billion to US$110 billion. It is not in addition to that figure.

As an extrapolation, this is perhaps not ideal. However, this is the “best statistical analysis” currently available to the organisation, Smith said.

To combat fraud risk, providers have looked to data and technology that can help them spot anomalous billing practices within “milliseconds”.

The highest rate of US telehealth visits are among Medicaid users, at 29.3%, Medicare users, at 27.4%, people of colour, at 26.8%, and those earning less than US$25,000 a year, at about 26%, according to Smith.

“The reason we point that out is a lot of those same communities are the ones that are targeted for insurance fraud – they are preyed upon for insurance fraud,” Smith said.

Telemedicine fraud has not, though, swelled to the extent that underwriters had feared it might, representatives of digital health services insurers told Insurance Business.

A Medicare review of providers using telehealth services during the first year of the pandemic found more than 1,700 organisations with billing practices posed a “high risk”, representing just 0.2% of the approximately 742,000 providers that used the service. The total cost of fraud to Medicare has been touted at US$60 billion annually.

One underwriter said that, despite some bad actors who have pled guilty to multi-million dollar schemes, telemedicine misuse likely constituted a “fraction” of overall health fraud.

“We expected, as consumers of telemedicine and as insurance providers to telemedicine companies, to see high amounts of fraud in telemedicine just because of the virtual nature of it,” said Jennifer Schoenthal, Beazley underwriter in miscellaneous medical & life sciences.

“What we actually found, though, is that telemedicine fraud is not as widespread as people had predicted.”

The head of one MGA’s digital healthcare practice questioned whether some behaviour being labelled as fraud could have been unintentional, with reimbursement requirements potentially like navigating a “labyrinth”.

“During the pandemic, there were more and more [codes] that were being added for different types of healthcare services, so navigating that at a point in time when they put it live was quite difficult for some healthcare providers,” said CFC head of professions and healthcare Tim Boyce.

“I suppose there’s innocent coding errors, and there’s perhaps non-innocent ones.”

The four strands of telemedicine insurance fraud typically seen in the US, according to the Coalition of Insurance Fraud:

  • Unlicensed medical providers – telehealth has contributed to a “blurring of borders”, according to Smith, and made it possible for operators to offer services in jurisdictions where they may not be licensed.
  • Billing for services not rendered – saying a service has been provided that has not.
  • Upcoding – for example, a service that should only have taken a few minutes to carry out may be billed under a code as having taken much longer.
  • Improper patient sharing – wherein a patient is unnecessarily “shopped” around specialists and consultants when there is no medical need.

What charges have we seen from telemedicine fraud?

Healthcare fraud can be big business, and telemedicine busts have unearthed alleged illegitimate ventures running into the billions of dollars in the US.

The country’s Department of Justice announced criminal charges against 36 people in July for alleged involvement in healthcare fraud schemes valued at US$1.2 billion. More than US$1 billion of this related to telemedicine, the DOJ said.

At that time, previous investigations had uncovered over US$8 billion in alleged telemedicine related fraud, with some big cases pre-dating the pandemic.

In 2019, following Operation Brace Yourself, 24 individuals were alleged to have taken part in schemes involving illegal bribery and kickbacks. They included c-suite executives at five telemedicine companies.

That year, the boss of two telemedicine companies, Lester Stockett, CEO and owner of Video Doctor and Telemed Health Group, pleaded guilty to a US$424 million conspiracy to defraud Medicare and receiving illegal kickbacks in what the DOJ described as one of the “largest healthcare fraud schemes ever investigated by the FBI and the US Department of Health and Human Services Office of the Inspector General”.

Stockett admitted that he and others had paid illegal kickbacks and bribes to healthcare providers to order “medically unnecessary” braces, the DOJ said, and that he had made “false and fraudulent” representations around the business’s legitimate profit and revenue.

Legitimate telemedicine organisations have, meanwhile, rejected illegal behaviour. American Telemedicine Association CEO Ann Mond Johnson said in a 2020 statement the group was “appalled” by the actions of “charlatans”.

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