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Updated on: June 22, 2012

Can Predictive Modeling Be Used to Score the “Good Guys”?

Original story posted on: February 15, 2012

In January 2012, The Centers for Medicare and Medicaid Services (CMS) announced that it would postpone the implementation of two pre-payment review demonstration programs until June 2012. Initially, the Fee-for-Service Recovery Audit Payment Demonstration (the pre-payment audit program) was supposed to focus on in-hospital claims for short stays in 11 states; while the Prior Authorization Demonstration (the prior authorization program) would target durable medical equipment (DME) providers on claims submitted for power mobility devices.  These demonstration programs would have required hospitals and DME providers to submit additional documentation on claims where the diagnoses didn't clearly indicate medical necessity or where there is a suspicion of fraud.


Understandably, healthcare providers and their advocates opposed these demonstration projects because of the far-reaching implications they would potentially have on hospital revenue streams and access to care for disabled patients. The same level of scrutiny would have been applied to every hospital in the 11 states where the pre-payment audit program would have been conducted and every DME provider that supplies mobility devices in the 7 states where the prior authorization program would have been conducted. This scrutiny would apply no matter how careful these targeted providers have been in the past, or how much they have invested in compliance training and education for their billing and coding personnel.  The broad sweeping enforcement nets that are traditionally used threaten to ensnare both the "good guys" as well as the "bad guys."


Instead of casting wide nets that indiscriminately catch both the compliant and the fraudster, using predictive modeling and provider profiling with carefully administered case mix adjustment would provide CMS and investigators with the insight to differentiate between the "good" and the "bad" providers. This would allow good providers to take care of their patients without the burden of an investigation looming large in the background, and investigators could focus on the those providers that have been draining the system and violating the public trust.


Profiling has been used in practically every sector of the economy, by every industry both public and private; from entertainment and food to safety and law enforcement to banking and financial services.  Used appropriately, profiling provides valuable information about the people and markets the industries serve.


Taken to an extreme, the unintended consequences of profiling leave more than a bad taste in the mouths of its targets; they can create disruptions in people's lives, destroy markets and can cause serious personal or societal repercussions.


Consider the following examples:


9/11 redefined U.S. air travel.  After a decade, passengers have grown accustomed to waiting in long lines at airport security, removing their shoes, and traveling with only small quantities of liquids.  All travelers have been subjected to the same level of security. Recent reports of screening devices that project overly revealing body images and pat-downs of young children and elderly disabled women confined to wheelchairs have re-ignited the controversy over whether law-enforcement agents should be utilizing racial or ethnic profiling techniques to screen passengers.  Profiling in law enforcement has typically called attention to characteristics that define or single out the "bad" guys.  Opponents of racial and ethnic profiling believe that by singling out the bad guys, terrorists will focus recruiting efforts on operatives that don't fit the profile to slip by undetected.


Instead of testing the collective patience of all air travelers, consider the newly introduced service that identifies the "good" guys.  Theoretically, identifying them prior to travel would expedite the security evaluation and significantly cut down the amount of time that air travel currently takes.


U.S. Customs and Boarder Protection offers a Trusted Traveler Program that expedites pre-approved, low-risk travelers through dedicated lines and kiosks.  Travelers are required to submit to an intensive background check and an interview with a Transportation Security Adminisitration (TSA) agent. In other words, the applicant agrees to be profiled upfront.


In the 1960s, the financial services industry began using credit scores to determine whether a person or entity was a good or bad credit risk. Banks and other lenders would reward customers whose scores reflected a good risk with larger lines of credit, lower interest rates on loans and other incentives.  One late payment or even paying too close to the due date, exceeding your credit limit, using a credit card too many times or not enough times seemed to have a negative impact on your credit score.



Every consumer behavior was being used to understand and inform not only creditors but other vendors also, like landlords and insurance companies, about the risks their customers posed.  Used as a curmudgeon, a credit score can frustrate peoples' lives or the progress of a business.  But consumers and businesses have discovered that by embracing their credit rating and making even small changes in their financial behaviors, they can improve their credit scores and make it work to their advantage.


If CMS's goal is to achieve a loss ratio where fraud, waste and abuse are reduced to levels where the cost of eliminating more fraudulent behavior outweighs the recovery factor, then applying the paradigms from airport security and financial services industries to healthcare is appropriate.  Identifying the providers and their claims that are most likely fraud prior to payment would streamline the efforts of special investigations units and enforcement agencies.  Enforcement efforts could be focused so that scarce resources are not squandered on unnecessary or invalid investigations.  Recovery audit contractors (RACs) and Medicare administrative contractors (MACs) must consider the power and impact that their investigations have on both "good" and "bad" providers and appreciate the disruption that is caused in the lives and businesses they investigate.


On the provider side, once healthcare providers recognize that profiling could be used as effectively to identify patterns of behavior, they won't have to be wary of submitting to its scrutiny.


About the Author


Karen Mandelbaum, J.D., MHA, is an attorney with both technical and policy experience in the healthcare industry. Karen is an associate attorney at the law firm of Tilton & Dunn PLLP. Karen has a strong background in the contracting, compliance and regulatory affairs issues that uniquely affect healthcare organizations. She has extensive experience representing clients who have been subjects of both public and private payer fraud investigations and recoupment actions. Karen earned her law degree in 2005 from William Mitchell College of Law. In addition, she holds a master's degree in healthcare administration from the University of Minnesota's Carlson School of Management.


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