Health care fraud and the promise of predictive modeling


It has become clear after speaking with numerous health insurance carriers, both in the United States and beyond, as well as at conferences (such as NHCAA), that there is a mass movement towards the nirvana that is "predictive modeling."

Now that our industry is realizing the importance of predictive modeling – it is important to have a direct dialog about what value it brings to aberrant behavior detection in the health care industry.  To start, let it be clear that predictive modeling provides the potential for detecting complex behavior different from other mathematical methods.  With that said, predicative modeling is not the "silver bullet" that people seem to think it is, and there is a great deal of confusion as to what it is in the first place.

A good starting point is too distinguished between descriptive and predictive analytics.  Descriptive analytics looks at current/historical state to tell you what happened or what is happening currently. Examples of this are cluster analysis, correlations, multivariate, etc.  All of which are very useful is telling us what is happening – but not predicting future behavior.

When people discuss predictive analysis, the first thing out of their mouths is typically, REGRESSION, clearly the all-time favorite…. But sadly, not always the best option. In many cases, decision trees (sometimes called classification trees) are better for health care, because they handle missing data well (and health care data always seems to have gaps), and they are very easy to example.

Imagine going to court and trying to explain a ‘neural network’ to a group of lawyers (who traditionally are not statistically inclined – though, I’m sure there are exceptions), to justify why a doctor is being investigated.  I do not envy anyone that experience.

However, one of the most significant issues with predictive analytics is that they require historical reference to build – simply stated, if you’ve never seen it before you can’t build it.  What this means is that all new fraud will slip through the cracks, until enough events have occurred and been identified to build a predictive model.

Likewise, there seems to be a great deal of hype and misconceptions around predictive models.  True, predictive methods are very useful, but only as part of larger analytics approach.  Transactional rules are great for identifying simple up-coding and combine very nicely with predictive analytics.  Anomaly detection (or outlier analysis) is wonderful for spying new trends.  Social network analysis (or link analysis) identifies collusive behavior.  But all of these methods work best collectively.  Largely to identify patterns that best suited to each method, but also to work collectively to reduce false positives.

This list of options always begs the question, “is there one best solution to the problem?”  I would suggest that you want to use all the tools in the box, and pick the best analytical tool for your particular problem. Start by learning about the different types of analytics today.



About Author

Ross Kaplan

Principal Solutions Architect

Ross Kaplan serves as the Principal Global Solutions Architect for Health Care in the SAS Security Intelligence global practice. He supports health care cost containment (Payment Integrity) initiatives across the Health & Life Sciences, State and Local Government, and Federal Government verticals. He has been active across North America, Europe, Middle East, Asia Pacific and South Africa. Providing industry expertise and vision at conferences and directly to customers, Ross has been at SAS for over eight years Ross is a 16 year veteran in the health insurance industry, focusing on analytics in health and condition management, member retention, and provider profiling prior to specializing in health care. He has assisted health plans, federal and State and local government agencies in defining their requirements and providing guidance in their solution advancement. Ross is also trained and experience in Healthcare privacy laws. Prior to SAS, Ross served as a solutions architect at Computer Associates and Siebel Systems, working with the Fortune 1000. He has supported other industries such as Insurance, Banking, and Pharmaceutical. However, his primary focus has always been in health care, receiving training in HIPAA and having direct input in Siebel’s health care product development. Ross has been featured speaker at many industry events focused on health care cost containment and payment integrity, most recently on the topic of social network analysis and link analysis, predictive analytics, and fraud/waste and abuse in the European market. Ross earned a bachelor's degree in Business Administration, with a concentration in Computer Information Systems (CIS) from San Francisco State University and his Master’s Degree in Statistics as well as an MBA with a concentration in Systems Analysis. Sales Training: • Consultative Selling • The Customer Delight Principal • Major Account Sales Strategy

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