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Catch me if you can

The rising cost of healthcare fraud
Data swag

We bemoan the rising costs of drugs and devices in the overall health system cost equation. We fret about the cost of labour (ie physician salaries). We worry about the increasingly expensive (and complex) insurance options available to patients.

But what we should really be concerned about is the rising cost of healthcare fraud. If healthcare fraud were a virus, it would be Ebola. In other words, it's gone 'pandemic' in recent years. So much so that the FBI (yes, that FBI) has a 'most wanted' list of individuals suspected for conspiracy to commit healthcare fraud. And to be really clear, this fraud goes both ways: provider fraud and patient fraud. Everyone is implicated. The irony of the situation is that as we develop increasingly complex and sophisticated tools and platforms to drive better care delivery and improve outcomes, it is this very increase in sophistication that gives rise to increases in fraud. As we develop a better system, hackers develop an even better system to defraud it.

Take a look at the charts below and tell me what you see. The number of data breaches in healthcare represents almost 50% of all the data breaches in 2014. And although it's only 10% of all records, the absolute number of records breached continues to rise and will, one day, surpass that of the 'business' category. It's staggering to think that healthcare is the runaway industry leader in this regard. If you'd asked me, I would have most certainly told you that the financial services industry had the most breaches what with credit card and banking information ripe for the picking. The Economist (31 May, 2014) suggested that healthcare fraud in America alone contributes $272bn in incremental costs to the system.

Data breaches by industry 2014
(720 breaches in total) 

Records breached by industry 2014
(81.6 million records in total)
















What could a possible breach at the extreme look like? Hypothetically, suppose that there was a reasonably large city on the East Coast of the United States and let's suppose that this city had a world-famous marathon every April. Let's call this city Boston. Now suppose even further that there was a tragic bombing at this marathon and that, in the aftermath of this event, the media reported the bombers' names and dates of birth. And then the media reported the bombers' addresses. And then interviewed the bombers' maternal aunt (who had the same maiden name as their mother). And now suppose that some really smart people sat at home and took copious notes and realised that they had all the biodata required to submit a fraudulent claim. Sounds far-fetched, doesn't it? It happened. Multiple times in fact, according to John Halamka, healthcare IT guru and one of the most influential thinkers on the subject of healthcare IT. In a speech that he delivered at Tufts University some 11 months ago, he recalled the aftermath of the Boston Marathon bombings and the chaos that ensued. He recounted how the Massachusetts health system received numerous claims for reimbursement of healthcare expenses all using the personal biographical data (name, birthdate, address, mother's maiden name, etc) of the two bombers. Welcome to the 21st century ladies and gentlemen.

The numbers are staggering and the scope of the problem is mind-bending. The solution is most certainly not a one-dimensional one. In fact, I'm not even sure there is a solution. This might be a case of 'bending and not breaking'. A $272bn dollar problem doesn't lend itself to 'easy fixes' and Band-Aid solutions. The high-profile fraud à la Boston Marathon bombing scenario I outlined is the exception. It's the day-to-day provider fraud (billing for services not rendered) and patient fraud (attempting to recover payment for services not received) that is the problem. Perhaps we just accept a certain level of fraud in the system as the cost of doing business.

Article by
Rohit Khanna

is the managing director of Catalytic Health, a heathcare communications, advertising & strategy agency. He can be reached at:

28th January 2015

From: Regulatory, Healthcare



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