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Expert Testimony
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The information found in this program is a compilation of data that is not necessarily the views of McCoy Consulting, Inc. This information is an attempt to give the views of all parties in the workers' compensation system. Workers Compensation Claim
Management "It is in the best interests of society that valid claims be ascertained and fabricated claims exposed." Supreme Court of Pennsylvania The purpose of this program is to help you detect the signs of potential fraudulent claims and to take the appropriate action to involve Fraud Investigators as soon as possible when fraud is suspected. This program will cover only one type of fraud, Workers Compensation. The United States Chamber of Commerce believes that about ten percent of all workers compensation claims may involve fraud. The actual amount of workers compensation fraud remains unsubstantiated. This program will cover only one type of fraud, Workers Compensation. The United States Chamber of Commerce believes that about ten percent of all workers compensation claims may involve fraud. The actual amount of workers compensation fraud remains unsubstantiated. Estimates vary from ten percent to twenty-five percent, indicating that most claims are legitimate, but as small as the number of fraudulent claims may be, their cost to employers and insurance carriers is enormous. The true dimensions of workers compensation fraud remain unclear. The nature of the crime makes it difficult to detect, and even the most sophisticated detection efforts are too new to have produced hard data. Many insurance companies accept fraud as part of the price of doing business. The cost is then passed on to their customers. By aggressively pursuing fraud, we reduce costs while providing needed care for legitimate employee injury claims. Spring 1993 issue of The Lynch Ryan Report "Most people assume that fraud involves primarily workers faking injuries. To be sure, this happens. To find the heart of the fraud problem, however, you must follow the money. And money most often ends up in the hands not of workers, but he professionals who live off the system: a relatively small percentage of the nation's doctors, lawyers, insurance adjusters, and dishonest employers. While blame most often falls on the shoulders of the worker, we believe that a small minority of professionals make the most money through fraud." In workers compensation there are several kinds of fraud that you should be looking for. These include:
Defining workers compensation fraud is also a problem. As you will see from the following sections, this type of fraud can be committed by otherwise "honest" citizens or by professional organized crime rings. It has been called the "blue collar lottery", "workers' con" and the "hidden crime". By definition fraud is: Willful deceit, trickery! While the cumulative effects of all workers compensation fraud may be the most damaging, individual cases of abuse tend to involve small amounts of money and are the most difficult to identify. Workers compensation fraud has been pushed to the top of the reform agenda, the front pages of newspapers, and to prime- time network television news. It is clear that many types of fraud and abuse in workers compensation are preying on an already troubled system. Identifying the types of fraud and addressing all levels of the problem is a top priority for the workers compensation industry. The attorney general of the state of Massachusetts offers the following advise to solve the problems of workers compensation: Make your work environment as safe and risk-free as possible. Safety eliminates injuries that could develop into prolonged disability cases. The actual cost of workers compensation is approximately three or four times the cost of the claim costs incurred as a result of on the job injuries. The elimination of injuries eliminates the potential for fraud in workers compensation. Educate your employees about the workers compensation system. Employees have little understanding about the workers compensation system. Educating them that it is the employer, not the insurance carrier paying the losses can help reduce prolonged disabilities. Effectively manage cases when employees are legitimately injured. The management of a workers compensation claim must be pro-active and not reactive. It cannot be to submit a claim to the insurance carrier and lose interest in the outcome. An employer must remain involved in the entire process from injury to return to gainful employment. Offer employees temporary modified-duty whenever possible. The most effective way to control the cost of workers compensation is return injured employees to employment. In 1980 the average length of time a person injured on the job was out of work was 59 days. By 1991 that average increased to 87 days. Each of those days represents additional loss costs. In addition to reducing loss costs for lost work days the most effective program for controlling medical costs is returning injured employees to gainful employment. This also increases company productivity. He added that if fraud is suspected, "document it, work with your loss management firm, work with your insurer, work with the Insurance Fraud Bureau, and push the case so it ends up fully investigated, ready for prosecution..." UNIONS OPINION OF FRAUD UNIONS OPINION OF FRAUD "Fraud is involved in fewer than five percent of all cases. What I see out there are legitimate injuries that happened to motivated and skilled people who really want to get back to work. The trouble is, no one knows how to help them. What the union wants is simple: fair and consistent treatment. Give an injured employee timely and high-quality care, offer modified-duty, and he'll be back on the job quickly. That's our goal, and as I see it, that's management's goal as well." Arthur A. Coia, President Laborers' International Union of North America "I find the topic of fraud to be a great irritant. Of course, any fraud is too much fraud. But the reality is that fraud is all too often used politically against the legitimate interests of injured workers. If we continue on this path, workers will say the heck with workers compensation and go back to the tort system." James Ellenburger, Assistant Director Occupational Safety & Health, AFL-CIO FRAUD INVESTIGATOR The primary objective of a Fraud Investigator is to conduct thorough, impartial and timely professional investigations into claims suspected of containing fraudulent aspects, in whole or in part. The findings of these investigations must be accurately reported to facilitate the basis for a proper, fair and equitable evaluation of a claim. Each Fraud Investigator must operate in adherence to the highest professional standards. The establishment of investigative guidelines assures quality standards and provides a means by which performance can be evaluated and improved. Steps to take in determining if a Fraud Investigator should be involved: Step #1 Carefully read the first notice of injury. Insure that all the details are complete. Notice if there may be anything unusual about the details. For instance, does the injured employee have a post office box for an address? Does the employer have any doubts about the notice of injury? Although it may not be unusual to report a Friday accident on Monday this is certainly a question that must be pursued. Any delays in reporting an accident regardless of the day of the week involved should be questioned. The fact that an accident occurs on a Monday is of little consequence. Twenty-one percent of all workers compensation claim occur on Monday. Twenty percent on Tuesday, nineteen percent on Wednesday, eighteen percent on Thursday and sixteen percent on Friday. Step #2 Contact all the parties involved. Good claim practices require a three point contact within 24 hours of receipt of the notice of loss. You should contact the employer, employee and physician. You should also contact any witnesses that are mentioned in the accident report and ask both the injured employee and the employer if there were any witnesses not mentioned in the report, if so they must also be contacted. Step #3 If your investigation determines that fraud may be involved you must refer the case to a Fraud Investigator for further inquiry. Fraud Investigators are a valuable resource in managing claims. Fraud Investigators have a knowledge of the law and fraud statutes. THE RIGHT TO PRIVACY One of the most important concerns that a claim representative should have when making a referral to a Fraud Investigator or any private investigation company is that the injured worker's right to privacy is protected. The claim representative should recognize that making such a referral does not remove from the claim representative the responsibility of the management of the claim. If not properly managed an investigation may result in civil or even criminal actions for the violation of the injured worker's right to privacy. For example, information concerning pending criminal investigations is confidential in many jurisdictions, and may not be disseminated to sources outside of law enforcement. This is to protect the subject from undue public embarrassment, ensure the safety of witnesses, and ensure that the investigation will proceed without interference. The Supreme Court of the United States has examined the right of an individual's privacy since 1890, and has discussed this right under five constitutional amendments. Those amendments discussed so far are the first amendment right of free speech, the third amendment prohibition of peacetime quartering of soldiers in any house without the owner's consent, the fourth amendment prohibition of unreasonable search and seizure, the fifth amendment privilege against self incrimination, and the ninth amendment reservation to the people of the rights not enumerated in the constitution. The claim representative should be careful in what precipitates a request for an investigation, how the investigation proceeds, and what the final outcome is when the investigation is finalized. There is no place for emotions in the opening or continuation of an investigation. There are three specific areas of concern for the claim representative and the investigator to protect an individual's privacy. (1) The intrusion upon the injured workers' seclusion or solitude or into his private affairs; (2) The public disclosure of embarrassing private facts about the injured worker; (3) Publicity which places the injured worker in a false light in the public eye. When a surveillance or activity check in ordered, the claim representative should know that the right of privacy of an injured worker has been jeopardized or violated when there are "those instances in which the surveillance, shadowing or trailing is conducted in: (a) an unreasonable and obtrusive manner or (b) with the intent on disturbing the sensibilities of an ordinary person without hypersensitive reaction." When an investigation begins special safeguards apply to the privacy of:
Investigations must be reasonable and not blatantly aggressive with the entire intent of your efforts on not disturbing the injured worker emotionally or physically. Never commit, or allow to be committed a criminal wrong in order to actively conduct an investigation, (i.e., peeping Tom). Conduct investigations in as much secrecy as possible keeping the integrity of the injured worker always first hand. This secrecy extends to remarks, conclusions and actions to others outside the investigation. The injured worker's home must never be entered by an investigator and a safe distance should be kept from it! Always make sure the information obtained from government or private agencies is public information or that a specific or general release has been obtained from the injured worker for the purposes of gaining access to certain proprietary records. Employee Fraud Most people assume that fraud primarily involves employees faking injuries. There is no doubt that some employees are involved in fraud but no data substantiates the degree to which this fraud is perpetrated. According to the Insurance Research Council about one in twelve U.S. adults say it is acceptable for someone injured at home to claim their injury is work related in order to collect workers compensation benefits. Seventeen percent of those interviewed said it is acceptable to stay out of work longer than medically necessary following an injury or illness. A huge barrier facing the insurance industry is that many believe committing fraud against an insurance company is perfectly OK. A survey conducted by the Insurance Information Institute found that more than seven out of ten Americans pointed to the desire to get back some of the money paid over the years as a motive for filing dishonest claims and a belief that insurers reap huge profits. In times of economic hardship employees may claim on the job injuries rather than take a chance of being laid off and receive less than generous unemployment benefits. A poll conducted by INC magazine of business owners blamed their employees for only 19% of the fraud compared to 47% for lawyers, 26% for state government and 10% for the medical providers. A survey conducted by William M. Mercer, Inc., of Chicago found that eighty-nine percent of employers believe their workers compensation programs are abused at least twenty-five percent of the time - though they also acknowledge they, too, are part of the problem. Insurance companies are held partially to blame according to this same group of employers. They hold carriers responsible for 16% of the fraud. When looking for fraud on the part of employees there are two types to consider.
What are the indicators of potential fraud? 1. Claim information is vague. In order for you to draw the conclusion of vague claim information you must have reviewed the first notice of injury in detail. You have to ask yourself, is it possible for this accident to have happened the way the employee described it, especially as it relates to the injury and disability involved? Does the employee's description of what happened coincide with the employer's description and the witnesses' account of the accident. 2. The injury. Does the physician's diagnosis support the type of injury the employee is claiming? Is the injury something that could happen with the type of accident reported? Is there any difference in the physician's diagnosis and the way the employee claimed he was injured? 3. Malingering. Is the employee exaggerating the extent of disability as it relates to the injury and the physician's findings? 4. Employee's Performance Record. Obtain information regarding the employee's work performance Does the injured employee have a history of filing workers compensation claims? Was the employee on some form of disciplinary notice? Many times a contrived injury may be the result of an employee that is disgruntled with the employer. 5. Employment Conditions. Are there any suspicious conditions present that may indicate whether or not the injury or continued disability may be contrived. 6. Professional Discrepancies. Make sure any medical or legal document that supports the claim is in order with no discrepancies. This includes medical history, accident history, dates and witnesses. Faked Injuries If there is evidence that the employee was not injured at the work place, or if no injury exists then there is potential of fraud from a fake injury. This type of fraud represents only a small percentage of workers compensation fraud. Out and out fraud is rare! Proving this type of employee fraud is usually very difficult. If must be detected early and referred to a Fraud Investigator. This type of workers compensation fraud is also referred to as "hard core" fraud. Some employees seek workers compensation for injuries incurred at home on the weekend. This type of scam is called "Monday morning syndrome". A problem with questioning every Monday injury is that statistics show that even though Monday is the most common day of the week for injuries with 21%, it is closely followed by the rest of the week statistics. Tuesday is 20%, Wednesday is 19%, Thursday is 18%, and Friday is 16%. This makes some rational sense when you consider you are more likely to be injured the first day back at work after relaxing on the weekend. Fraud can occur on any day of the week! Abuse A more common type of fraud is when an employee is injured on the job and receives workers compensation benefits but stays out of work longer than medically necessary. A Fraud Investigator will be most helpful in documenting abuse or "prolonged disability". Another term for prolonged disability is malingering. Some employers use workers compensation as a means to eliminate employees who they perceive to be a problem. Malingering may happen because the employer has not let the injured employee know there is an opportunity to return to transitional employment. The goal is to get the injured employee who is medically able back to work as soon as possible. An employer showing concern for their injured employees from the time an accident occurs and throughout the period of disability limits the potential for fraud to occur. EXERCISES EXERCISES Read each of the case studies below and complete the questions. What kind of fraud is involved? Explain why you believe this is fraud. Be thorough and creative in your review of the cases and formulate a plan that will produce effective results in the identification, pursuit and prosecution of fraud. Case Study Number One John Costigan is an employee of ABC House Movers. One Saturday he and his co-worker, that coincidentally is also his wife, state they are on the way to interview a prospective client about moving a house. They claim that while on the way to the client's house they are involved in a one car accident in which John suffers a neck injury. His wife reports no injuries in the accident. On Monday the employer reports the accident by mail and you receive the accident report the following Friday. When you contact the employer you find that the employer wants you to pay the claim as soon as possible, and there is no question in their mind that the accident happened exactly as the employee states. Since the employer has no questions about the claim you should pay the claim as soon as possible, True or False? ___________________________________________________________ The answer is that you do not have sufficient data to make a determination and there should be serious questions raised about the claim. Is it normal to meet with clients on weekends? Perhaps it is but this question should be asked of the employer. Is it unusual that an injured employee's wife is also a co-worker? Does the employer provide the automobile? Why is the employer insistent that the claim be paid? Why didn't the employer report the claim using telephone reporting? Why doesn't the employer know who the prospective client is? As you can see several questions must be pursued in order to determine if the claim involves fraud or not. When you interview John Costigan and his wife you determine that the potential client is Mrs. Smith. Costigan and his wife do not see any reason for your delay and threaten to obtain the services of an attorney. This threat combined with the employer's insistence that the claim should be paid results in you accepting the claim to avoid unnecessary litigation, true of false? ___________________________________________________________ The answer is that you still do not have sufficient information to make a determination as to compensability. What would your next step be? ___________________________________________________________ You should contact the potential client, Mrs. Smith. Mrs. Smith advises you that she is the aunt of both Mrs. Costigan and the owner of ABC Moving Company. Now it becomes clear that there is an interest on the part of our policy holder and the "injured employee" to have the claim processed as workers compensation. You also find from Mrs. Smith that John Costigan and his wife had no firm appointment to visit with her, just at their convenience since the home in question was one that they wished to purchase from her and move for themselves. What type of fraud have your detected? ___________________________________________________________ That is correct, a phony injury. Case Study Number Two Linda Robison is an employee of Awful House Restaurant. She was injured on the job while lifting a 25 pound box of chicken. The manager and three other co-workers witnessed the accident. She was taken to the company physician who indicated she should be off work for two weeks and then return for a follow-up visit. You make contact with the employee, employer, the physician and each of the witnesses within 24 hours of receiving the telephone report of injury. Each of the parties contacted confirm the employees version of the accident. You diary the claim for two weeks to make contact with the physician. When you do this you find that the employee failed to return for the scheduled follow-up visit. The employer has not seen the employee either. When you attempt to contact the injured employee you are unsuccessful in reaching her. This goes on for seven more days calling all times of the day and evening. Eventually you contact the injured employee's home and her child says that her mother is at her aunt's cafe. Upon calling the cafe you recognize the injured employee's voice as the individual answering the phone. What type of fraud could this be? ___________________________________________________________ That's correct, abuse or malingering. What is your next step? ___________________________________________________________ That's correct, you assign the case to the Special Investigations Unit to confirm the injured employee has returned to work for her sister while receiving workers compensation benefits for her legitimate accident the occurred on the job. Provider Fraud Sometimes attorneys and medical providers, more than injured employees, are responsible for fraud. Some medical providers who treat injured employees make their living from such practices. Many times these providers are tempted to abuse the system because the insurance industry has not scrutinized workers compensation medical claims as carefully as other employee medical costs. Under workers compensation the rate of payment for hospitals, physicians, pharmaceuticals and other medical providers traditionally has been fifty percent higher than what has prevailed in employee benefits insurance. To qualify for workers compensation benefits, an injured employee must see a provider of medical services. This provider of medical services provides diagnosis and treatment of injuries suffered on the job. According the the NCCI's Issues Report for 1993, television viewers, newspaper readers and users of the Yellow Pages in Southern California find it hard to miss advertisements promising free medical care and money through California's workers compensation system. Free medical care? And money? Who could resist that? Some ads are even more alluring. One billboard on a Los Angeles street gets right to the point: "Call 1-800-DINERO" (Spanish for "money"). Unfortunately, California is not alone in this area of workers compensation abuse! If for any reason the medical provider deliberately writes a medical report to support a disability when no disability exists, the provider is committing fraud. When employers see media coverage of "medical mills" operating in many states, they have good reason to be concerned. Many dollars of unnecessary medical expenses can be accumulated or even charged for when no services are rendered. In these cases the employee many times is not aware of what is being charged and has no control over the fraud that is occurring. Most providers are honest and can be trusted. They have a genuine concern for injured employees and want their patients to get better and return to work. Some have their own motives for participating in fraud. Whatever the motive may be this type of fraud is "professional fraud" and is a crime. There are three common reasons for a provider to falsify a medical bill or report. 1. The provider wants to make sure they are paid for services they have rendered. 2. The provider wants to earn more money by having patients return to the office for more treatments than they actually need. (Over utilization) 3. To earn more money by referring to another provider, that may be owned by the referring provider. A common definition of fraud by a provider is: "Misrepresentation or omission of material facts with the intend to defraud." PROVIDER FRAUD WARNING SIGNALS According to the California Workers Compensation Institute, red flags that may indicate provider fraud include:
EXERCISES Read the case study below and complete the questions. What kind of fraud is involved? Explain why you believe this is fraud. Be thorough and creative in your review of the case and formulate a plan that will produce effective results in the identification, pursuit and prosecution of fraud. Case Study Number One A flight attendant was in route from Pittsburgh, PA to San Diego, CA. The plane encountered rough air and the attendant was injured when a large trash container struck her leg. Even though no one witnessed the incident, it was substantiated that rough air was encountered. The flight attendant had been employed for approximately one month. She immediately saw a physician in San Diego who recommended no work for a period of two weeks. The injury was only superficial in appearance and x-rays indicated no further damage internally. The employee continued to declare that she was in pain and could not return to work. She saw several doctors in San Diego who continued to respect her claim that she was not getting better and as such kept her from work. Several months after the injury, the employee moved to the state of Georgia, where she saw physicians who diagnosed her continuing pain as Reflex Sympathetic Dystrophy. The pain continued and so did the medical bills. It became apparent that the injured worker had no intention of returning to work and was now complaining that her medical bills were not being paid promptly, and that additional services were needed to supplement her daily living. These services included a twelve hour a day attendant for daily living, electric three wheel cart, and a whirl pool bath, just to name a few. The claim representative requested an activity check to confirm her disability. The activity check indicated that the employee was not disabled, and that there were no services being provide by her attendant. What should be the next step for this claim representative? ____________________________________________________________ The claim representative should request all available information from the employer, which would include the original Employment Application. Every element of that application should be researched for validity. Employer Fraud The most obvious employer fraud is what is known as premium fraud. Employers have had more incentives to defraud insurers as rates for workers compensation coverage have soared. Some employers falsely report the size and nature of their businesses to obtain a lower premium for their workers compensation coverage. Premium fraud is based on the way insurers calculate workers compensation premiums. Rates for premiums are based on size of payroll and are higher for work considered risky. There are hundreds of job categories, each with a different rate. To compute the proper rate, we need accurate data about an employer's payroll and the kind of work employees do. Some employers understate one or both, sometimes intentionally. Some of the claims we receive may be legitimate but you may see a claim for a particular job that is not logical. For instance the employer may have reported a particular employee's payroll as clerical for a lower premium rate then you receive a claim for a secretary that fell off a roof. In reality the clerical person was a construction worker and the premium collected was not correct. Another form of fraud is a company changing into a new company to shed a history of claims that have run up their insurance rates. One red-flag for premium fraud is a reported payroll that is too low for the number and type of workers listed. Another red-flag is an employer that gives only a post office box as an address. Although this fraud represents the largest sum of money it is most likely to be detected by auditors or underwriters. Claim representatives should be aware if these red flags when conducting their investigation. There are other types of employer fraud that you should be aware of. A common type of employer fraud is filing for corporate officer exemption then filing a claim for a corporate officer's claim of injury on the job. As a claim representative you must be aware of your state requirements for coverage of owners, partners and corporate officers. Most states do not consider owners or partners as employees. They can be covered by workers compensation if they elect to come under the workers compensation statute but to do so they must file a form with the state regulatory commission and use their salary in the premium calculation. As a cost savings measure several states have allowed corporate officers to opt out of the workers compensation system. This is done under the theory that the corporate officer is similar to an owner or partner with little or no exposure for workers compensation accidents. Usually these employees have the highest salary. If they opt not to be covered by workers compensation then their higher salaries are not included in the compensation premium therefore reducing the overall costs. Some corporate officers opt out then file claims for injuries on the job. Any time the job title of the injured employer is a corporate officer, ie: president, vice-president, secretary, treasurer etc., or they have the same name as the company, ie: John Smith of John Smith's Plumbing then you must determine their employment status and confirm with underwriting whether or not the injured employee has opted not to be covered by the workers compensation system. FRAUD INDICATORS
Other Fraud There are other third parties that may be influential in the fraud process in workers compensation. This may include a relative, neighbor or friend of a legitimately injured employee. Other third parties that may be involved in workers compensation fraud may include insurance agents or insurance claim representatives. Any action on the part of a third party to pay amounts that are not substantiated by the injury or to divert funds to themselves or others not involved in the claim is fraud as it relates to the workers compensation file. If you suspect that an agent or claim representative is involved in workers compensation fraud you must bring this to the attention of the unit manager who will contact corporate security. You should not confront any one you suspect of such fraud and you should keep such concerns strictly confidential.
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