Healthcare in Australia – A Growing Fraud Trend

Healthcare is a vital sector that directly impacts the well-being of individuals and the broader Australian community. 

However, like any other industry, it is not immune to fraud risks. 

Healthcare fraud can have detrimental consequences, from compromising patient safety to draining valuable resources. According to an independent review, between $1.5 billion to $3 billion is being lost to Medicare fraud and non-compliance every year in Australia^[1]. Therefore, businesses operating in this sector can be affected by healthcare specific fraud risks and should consider any associated risks and control mechanisms that can be used to combat the fraud risks.

Healthcare fraud can take various forms, including billing for services that were never provided, falsifying patient records, kickbacks, and pharmaceutical fraud. It often involves individuals or entities seeking to make illicit financial gains at the expense of the healthcare system and, ultimately, the patients. Fraud in healthcare not only leads to financial losses but can also include reputational damage, payment of fictitious invoices and jeopardise the quality-of-care patients receive. 

While many organisations have internal controls in place to combat fraud or corruption perpetrated by an employee or other associates related to the organisation, it can be easy to overlook these internal controls. 

A number of key areas of fraud risks in the Australian Healthcare system include the following:

Billing Fraud

One common type of healthcare fraud is billing fraud, where healthcare providers submit inaccurate claims to government-funded programs, such as Medicare. Providers may overstate the services they provide, bill for non-rendered services, or use incorrect codes to inflate reimbursement. For example, in this code manipulation scheme, providers might engage in ‘unbundling’ of services where they attempt to increase profits by billing separately for procedures that are part of a single procedure. Another method is by ‘upcoding’ of services where the provider bills for a higher level of service than actually rendered. 

Kickbacks and Incentives Fraud

Kickbacks and Incentives schemes are when healthcare professionals receive kickbacks, incentives, or referral fees for referring patients to specific facilities, providers, or services. These arrangements can lead to unnecessary treatments, tests, or procedures to diagnose a problem when the testing is not actually required or advisable. The additional fee for the unnecessary work is often split with the other provider. 

‘Ghost’ patients

Fraudsters create fictitious patients in their patient database and submit claims to Medicare and other applicable and relevant insurance programs for services supposedly rendered to these non-existent individuals. This type of fraud can also involve using stolen patient information to create fake claims.

Identity theft

Identity theft in healthcare can involve fraudsters stealing patient information to submit fraudulent insurance claims or obtain medical treatment, prescription medications, or government benefits. According to the Office of the Australian Information Commissioner, healthcare was the most targeted sector for data breaches in the January-June 2023 period, with 15% of all reported data breaches occurring in the healthcare sector^[2]. Furthermore, the healthcare sector has consistently featured in the top 5 sectors for the most data breaches reported of all sectors indicating that fraudsters place a high value on this information to perpetrate fraudulent billing, obtain medical treatment, or secure prescription drugs.

Why Are Healthcare Businesses Being Targeted

Healthcare is one of the largest sectors of the Australian economy at 10% of Gross Domestic Product (GDP)^[3]. With substantial government funding, private insurance payments, and out-of-pocket expenses from patients, the vast financial resources flowing through the healthcare system present an attractive target for fraudsters. In addition, Australia's healthcare system is a complex mix of public and private funding sources, including the government's Medicare program and private health insurance. This complexity creates opportunities for fraud, as the billing and reimbursement processes can be challenging to navigate and monitor effectively. Fraudsters exploit this complexity to submit inaccurate or inflated claims, engage in code manipulation schemes, and engage in other fraudulent billing practices that may go undetected.

Prevention and Detection of Healthcare Fraud

In Australia, the Australian Standard AS 8001:2021 Fraud and Corruption Control (“AS8001:2021”) has been the pre-eminent guide on how to prevent, detect and respond to the risks of fraud and corruption. Healthcare organisations can use AS8001:2021 as a guide to prevent and detect fraud by implementing a robust anti-fraud framework / program. This means ensuring that healthcare organisations create and regularly update policies and procedures that clearly outline their approach to fraud prevention and detection. In addition, healthcare organisations should conduct regular risk assessments to identify areas where fraud is most likely to occur. In the healthcare sector, this may involve evaluating billing processes, financial transactions, and data security. Finally, healthcare staff should receive regular training on recognising and reporting fraud. AS8001:2021 suggests developing training programs to educate employees about the types of fraud that can occur within the healthcare industry and how to report suspicions.

Another effective detection method is for healthcare organisations to implement fit-for-purpose whistleblower reporting mechanisms. According to the Association of Certified Fraud Examiners (ACFE) Occupational Fraud 2022 A Report to the Nations report, 58% of fraud in the Asia-Pacific region is detected by a tip^[4]. 

Therefore, it is imperative for healthcare organisations to provide avenues for employees, contractors, and other stakeholders to report suspected fraud and corruption. This can involve implementing secure and anonymous reporting channels where individuals can safely report their concerns. These channels should be easily accessible to all stakeholders.

Finally, ensure that healthcare organisations have a robust data analytics program which can help detect and prevent fraud. Data analytics can be used as an early detection tool as it enables healthcare organisations to identify unusual patterns and anomalies in claims, billing, and patient data. This early detection can help prevent fraudulent activities before they escalate, reducing financial losses. Data analytics can also be used for predictive modelling as it can forecast potential fraud risks based on historical data, allowing healthcare organisations to take pre-emptive measures to prevent fraud. This can include monitoring high-risk providers or regions more closely. Finally, data analytics can be used to identify unusual patient and provider behaviour by flagging unusual activities that may indicate fraud. This can include assessing patient-doctor relationships, identifying multiple claims for the same condition, or detecting providers with higher-than-average billing rates.

Overarching the prevention and detection methods listed above is Governance. Governance plays a critical role in combatting fraud in the healthcare sector in Australia for a number of reasons:

Regulatory Compliance: The healthcare sector in Australia is subject to numerous regulations, including laws related to privacy, billing, and fraud prevention. Effective governance ensures that healthcare organisations adhere to these regulations. It establishes clear policies and procedures to guide employees and providers in their daily operations, reducing the likelihood of inadvertently violating laws and regulations related to fraud.

Ethical and Cultural Influence: Strong governance sets the tone for an organisation's culture. When leaders prioritise ethical conduct, transparency, and accountability, it sends a clear message to employees and providers that unethical behaviour and fraud will not be tolerated. An ethical organisational culture encourages employees to report suspicious activities, ensuring that fraud is detected and addressed promptly.

Risk Management: Fraud in healthcare can result in significant financial losses, damage to an organisation's reputation, and legal liabilities. Effective governance involves implementing robust risk management strategies, such as identifying and assessing fraud risks, establishing internal controls, and monitoring for signs of fraudulent activities. By proactively managing these risks, healthcare organisations can reduce the likelihood of falling victim to fraud and minimise its impact.

Conclusion

Healthcare fraud is a growing trend in Australia, with various areas of vulnerability. As the healthcare landscape evolves, so do the methods of fraud. Staying vigilant and implementing comprehensive strategies to prevent and combat healthcare fraud are essential to ensure the continued integrity of the healthcare system and the well-being of patients. The key fraud risk provided here underscore the significance of this issue, prompting the need for ongoing proactive measures to mitigate fraud risks in the Australian healthcare sector.