Simple Analytic Test Reveals Massive Nursing Home Fraud

HealthcareClaimsGraphI have never been described as shy. In fact you can often find me chatting up strangers to learn more about who they are and what they do. I am often fortunate to enough to be able to offer some tip or tool that makes my new friend’s business or personal lift better.

For example, I meet Carol, a Claims Administrator who worked with several high profile assisted living facilities. Carol was concerned about fraud and abuse at the facilities she worked with, but she was not sure where to start. I suggested a simple analytical test to compare average healthcare claims submissions per resident between different facilities.

A few weeks later, I received an email with a bar graph attached and a frantic plea for help. Carol ran the test, and found that the claims per resident of one facility was 79% higher than the average per resident claims from all other facilities. Carol had found a problem, but was not sure of the cause.

I worked with Carol to design several more tests to determine whether there was anything about the population of this one facility that would cause them to use more health care services than any of the others. After determining that the populations of residents were similar among all of the facilities, we dug into the claims from the suspicious facility.

Almost immediately there were several red flags. First, there were unusually high numbers of residents on the same three drugs – Advair, Crestor, and Abilify. Second, the volume of hospital transfers and procedures such as MRI scans were significantly higher than any other facility. Finally, there were scores of resident complaints about the overreaching healthcare being provided. It was time to launch an examination.

My team conducted the examination, and uncovered one of the most corrupt operations that Hogan Forensics has ever seen. From the head of the facility to the janitors, almost every employee was engaged in fraud or abuse against the residents of this facility. Two of the administrators were receiving kickbacks from a local hospital for referring patients. A handful of nurses were diverting residents’ prescription medication to sell on the street. A maintenance worker stole the identities of several residents and ran up thousands of dollars in debt. Of the facilities 41 employees, 37 were fired for their misdeeds and 27 of those were arrested or charged with a crime.

This facility had been purchased by the parent company at a time when it was highly regard as the primer assisted living facility in the state. The parent company took an extreme hands-off attitude toward managing the facility due to the trust they had in the facility’s staff. The facility was forced to close, and the ensuing criminal and civil penalties cost the parent company $5.4 million.