26 Red Flags of Medical Provider Fraud in Workers Compensation

The large majority of the doctors, clinics, hospitals, chiropractors, pharmacists, and other medical providers are honest providers of medical service. Unfortunately, a small minority of medical providers knowingly try to profit off the workers compensation system in ways that are unethical and fraudulent. The unethical medical provider realizes that most people will not recognize their efforts to deceive and to commit fraud. The unethical medical providers are further embolden by work comp adjusters who do not have a basic medical understanding or who are so overloaded with claim files, they do not have time to question unusual or out of the ordinary billing and/or medical treatment.

While a few medical provider frauds start with a fictitious injury, most medical provider frauds start with a legitimate injury. The fraud begins when the medical provider knowingly begins or knowingly continues to provide medical treatment to the employee that is unnecessary. When the medical providers intent is to maximize the number of medical treatments, medical reports and referrals to other medical providers, the fraud has begun. Another way of looking at it – if the medical treatment is being provided is primarily for the medical providers benefits, not the employees benefit, it is medical provider fraud.

There are two primary types of unethical medical providers that commit workers compensation fraud – the claim mills with doctors working with attorneys to maximize each others income, and the lone medical provider who is not operating in concert with anyone else.

Claim mills vary from the totally bogus where the doctors and the plaintiff lawyers conspire to create inflated work comp claims to the quid pro quo “business relationship”. In the quid pro quo, the plaintiff lawyer directs the employee to treat at the medical provider who will keep the employee off work as long as possible and write the employee a highly favorable disability rating. The medical provider provides these “services” knowing that their biased medical reports will earn them additional clients from the plaintiff attorney in the future.

The injured employee who is treating at a claim mill may or may not know they are a part of the fraud being committed by the medical provider. If the doctor keeps telling the employee they need follow-up treatment and it is not safe to work, the employee is not likely to question it, especially if their attorney is telling them that going back to work will diminish their potential settlement of the workers’ compensation claim.

The lone medical provider who is committing work comp fraud know what he/she is doing is wrong, but wants to minimize the chance of getting caught by limiting the number of people who are aware of their unethical actions.

The work comp adjusters, claim supervisors and nurse case managers of insurers, self-insured employers and third party administrators need to be cognizant of the ways medical providers can commit work comp fraud. Some of the “red flag” indicators of possible fraud include:

1. The medical billing is much higher than normal for the type of injury incurred
2. The medical equipment used and billed for appears unnecessary
3. The injured employee does not recall having received the medical service billed
4. The medical billing does not have diagnosis codes
5. The use of a billing code that does not apply to the service performed
6. The resubmission of bills with diagnosis codes changed
7. The “padding” of billing codes by adding billing codes for related services not performed
8. The use of “upcoding” – the charging for a more complex service than what was performed
9. The medical billings normally or always exceed the state-approved medical fee schedule
10. The billing on consecutive dates for a minor injury
11. The billing for medical services on dates the employee was on vacation, out of state, etc.
12. The billing is for a date of service after the employee changed to a different medical provider
13. The medical provider bills for services previously billed and paid
14. The medical provider billing for non-emergency medical services on weekends or holidays when they would normally be closed
15. An unexplained increase in the frequency of medical visits, especially on older claims
16. The medical provider continues the same treatment program for an extended period of time without any improvement in the employee’s condition
17. A medical specialist billing for medical services not related to the specialty practiced
18. The same doctor-lawyer combinations are repeatedly involved with the same type of questionable injury
19. The medical reports are the same for various dates of service
20. The medical reports are nearly identical for different employees with different types of injuries
21. The medical reports are inconsistent with the medical services billed
22. The frequent submission of billing without the submission of any medical reports
23. The prescription drugs significantly exceed what is normal for the type of injury incurred
24. The dispensing of generic drugs while billing for brand name drugs
25. The dispensing of used durable medical equipment while billing for new equipment
26. The billing for durable medical equipment that is never provided

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It is medical provider fraud any time the medical provider knowingly provides false or fraudulent medical reports or medical billing for the purpose of their own enrichment. It is also medical provider fraud any time the medical provider provides services beyond the point where they are medically justifiable. All insurers, employers and third party administrators should be vigilant to be sure the employee is receiving all necessary medical services while at the same time protecting themselves from the small minority of medical providers who would use the work comp system for their own unjustified self enrichment.

Peter Rousmaniere commented, after reading this article, that the good thing is almost all of these issues can be researched automatically by medical billing review software. Peter is a featured writer about workers compensation for LRP’s Risk and Insurance Magazine and writes Working Immigrants webblog at http://www.workingimmigrants.com/

Author Rebecca Shafer, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and website publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. See www.LowerWC.com for more information. Contact:RShafer@ReduceYourWorkersComp.com or 860-553-6604.

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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.

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