IBM Helps Health Care Insurance Companies Fight Fraud With Advanced Analytics

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SOMERS, NY - 25 Oct 2006: IBM's (NYSE: IBM) Fraud and Abuse Management System, which provides detection capabilities to help health care payers identify questionable claims and develop cases for investigation, is being enhanced to provide even more efficient and cost-effective ways to tackle health care insurance claim fraud, waste and abuse.

The system, which was developed by IBM researchers and consultants in collaboration with leading health care insurance companies, is now being offered with an automated analysis capability, which can be added onto the client's system to reduce the cycle time for claims investigators, and in an "on-demand" model. Clients using the on-demand version have their analyses run on IBM computers and are charged based on the amount of claims processed and number of medical specialties being analyzed.

According to estimates from the federal government and issues-based groups such as the National Health Care Anti-Fraud Association (NHCAA), as much as 10 percent of all health care expenditures in the United States, or $100 billion dollars, may be lost each year to fraud, waste and abuse. Prevention and recovery of only a fraction of this $100 billion represents both a significant ROI opportunity and a competitive advantage.

IBM's Fraud and Abuse Management System supports the various aspects of fraud investigation and management, including prevention, investigation, detection and settlement. Using a unique combination of data mining capabilities, visualization techniques and reporting tools, the system can identify potentially fraudulent and abusive behavior before a claim is paid, or retrospectively analyze providers' past behaviors to flag suspicious patterns. The system far outpaces traditional manual processes by sorting through tens of thousands of providers and tens of millions of claims in minutes -- and then ranking providers as to their degree of potentially abusive/questionable behavior.

The system has been used by dozens of major health care insurance companies, such as Aetna which has recently identified more than 200 facilities with questionable outlier behaviors. "To date, the Special Investigation Unit has pinpointed more than $20 million in potential facility recoveries," said Benjamin S. Wright, business systems manager, Aetna Special Investigations Unit. Aetna has also used the system in a recent analysis on dermatology providers that resulted in pre-payment claims denials of over $2.5 million.

New Capabilities

IBM's Fraud and Abuse Management System has been enhanced to include an automated capability that applies analysis modules and logic to the data, automatically performing the analysis and building up the list of suspicious providers. It significantly increases the productivity of investigators by performing the initial analysis and identification, allowing the investigators to focus on case development and pursuit. Humana, Inc., for example, recently concluded a pilot project with IBM using the automated capability of the system to focus on the medical specialty of pain management. Humana's Special Investigation Unit evaluated claims against the backdrop of pain management providers' profiles and audit history, and was able to improve the time it took to identify and verify questionable claims by 30-40 percent.

Additionally, IBM has been involved in a demonstration project in which a number of counties are using the system in an on-demand model to identify Medicaid fraud, waste and abuse. As a result of this project, IBM is now making the on-demand version of the Fraud and Abuse Management System available to private health care insurance companies as well as state Medicaid agencies across the country. Through the on-demand model, IBM performs the complex analysis and develops the list of potentially suspicious providers as well as the details behind the conclusions which act as an action plan for investigators. The combination of the on-demand model and the automated analysis offers the advanced capabilities of the system to organizations that may not be staffed with in-house special investigators, such as smaller health care payer organizations, state and county Medicaid agencies and even private companies wishing to analyze the health care payments of their employees.

The IBM Fraud and Abuse Management System is a component of IBM's Fraud and Threat Intelligence initiative which provides additional tools to help companies detect fraud in a number of industries including banking, insurance and health care.

Originally developed at the IBM Research Labs in Yorktown Hts., NY, IBM's Fraud Abuse and Management System is available today through the IBM Center for Business Optimization. This group is putting advanced analytics to work by tapping into IBM's deep computing skills, industry consulting expertise and IBM Research's mathematical modeling capabilities to develop solutions that tackle complex problems involving massive data sets. In addition to risk management optimization, the Center offers solutions in the areas of supply chain management optimization, marketing investment optimization and dynamic pricing optimization. The Center is part of IBM Global Business Services. For more information visit

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