Verizon Uses Predictive Modeling To Detect Health Fraud

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The telecommunication giant has just unveiled a new software platform called Verizon Fraud Management for Healthcare, a fraud detection system tailored to the healthcare industry. It uses predictive modeling technology to examine unusual patterns and trends in incoming healthcare payment requests.

The platform is designed to send potentially fraudulent claims information to case managers for investigation before payments are made. Such a system, Verizon officials say, will help mitigate the administrative and legal costs involved when health organizations pay the claim and then go after the fraudsters, which usually involves hefty legal fees and other costs associated with a recovery operation.

According to Connie Schweyen, managing principal, Verizon Connected Healthcare Solutions, the system is geared toward spotting, for example, doctors prescribing excessive amounts of medication, the unusual use of patient identification numbers to order large amounts of medical equipment, and other trends that indicate falsified billings, or show that orders were not delivered or were medically unnecessary.

"The software can detect all of those things by using the algorithms within the system," Schweyen told InformationWeek Healthcare. "The software then scores those incidents and prioritizes the various kinds of cases and medical data to ensure that they are working on the highest-cost, most-at-risk cases first."

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In addition to detecting fraud, waste, and abuse in healthcare claims payment systems, the technology also offers customers the ability to:

-- Create faster responses to address potential risks.

-- Provide strategic insight into systemic issues to drive improvements or make necessary policy changes.

-- Generate executive-level management reports to measure results and determine return on investment.

The Centers for Medicare & Medicaid Services (CMS) already has begun using Verizon's fraud management platform as part of a Northrop Grumman-led team to detect fraud and waste in CMS' Medicare Program.

The technology, which CMS started using in July, is a customized version of the software platform Verizon uses for its own fraud detection programs. CMS uses the software to examine incoming Medicare program claims and routes those that might be fraudulent to case managers for investigation.

According to the latest statistics from the U.S. Department of Health and Human Services, in 2009, national health expenditures totaled $2.5 trillion representing 17.6% of the U.S. gross domestic product. Of that number, fraud accounted for as much as $260 billion, or at least 10% of annual U.S. healthcare expenses.

The Verizon platform is available immediately and the company is targeting the software to customers at federal and state health programs as well as commercial health insurers.

"The current post-paid model used for healthcare fraud programs is highly inefficient and unsustainable," Nancy Fabozzi, Frost & Sullivan's senior industry analyst covering healthcare information technology, said in a statement. "Verizon's use of advanced software technology to evaluate and process medical claims prior to payment is indicative of the future direction of healthcare fraud prevention."