Business IT - Technology for your business

IT Wire, 22 December 2011

Technology first conceived to keep watch over the world's financial markets and spot rogue activity has been tweaked for the health sector – and is now being rolled out to make sure that health insurance claims and hospital funding requests are the real McCoy. Such systems could potentially save what's euphemistically referred to as "leakage" - or fraud and error - running to hundreds of millions of dollars each year in Australia.

Estimates of the extent of fraud in the health insurance sector are quite rubbery, with figures ranging from 10 to 1 per cent of revenues. However, with the local health insurance market pulling in revenues of $17 billion a year according to analyst IbisWorld, even a 1 per cent fraud or error rate could cost it $170 million.

The Capital Markets Cooperative Research Centre (CMCRC), which developed the financial markets surveillance system called Smarts which has since been acquired by Nasdaq, has been working on systems to allow health claims analysis since around 2005. It had some early success with a system to track claims for ancillary items such as spectacles and dental treatment, but has only now announced the first sale of its more comprehensive Health Insurance Business Intelligence Service (CMC-HIBIS).

The system is being deployed in 24 of the private health insurance funds which use the HAMBS (Hospital and Medical Benefit System) to run their operations. The value of the deal has not been revealed.

There are, according to IbisWorld, 37 companies offering private health insurance in Australia with a handful of large dominant providers. Funds using HAMBS meanwhile are typically smaller health insurance providers, accounting for around 15 per cent of the market in total.

The Teachers Healthfund, which is the 7th largest health insurer in Australia and the largest of the HAMBS users has acted as the site for an extended trial of the system according to David Jonas, CMCRC head of commercialisation. He said that CMCRC was also in negotiations with some of the larger health insurer providers interested in using the system.

In a media release Mr Jonas said that: "The volume and complexity of health and compensation claims in Australia, and the universal adoption of straight-through electronic processing, make it impossible for human teams to effectively assess all aspects of every claim." Instead the CMC-HIBIS system trawls through data looking for anomalies which can then be brought to the attention of staff for checking.
Speaking to iTWire, Mr Jonas said that although health insurers already often checked their data for evidence of fraud or error this tended to involve; "Regularly taking dumps of data into SAS (a business intelligence system) and running it through." However that did not allow real time analysis of data he said.

It could also overlook cross sectoral issues that arose because of the; "Incredibly fragmented nature of the market" which might see several different insurance companies involved in a single claim. Mr Jonas said that under the CMCRC system insurers would typically upload their data to the CMC-HIBIS (which is being offered as a service) which would then analyse claims data and issue alerts where required.

"This gives transparency and operationalises surveillance," said Mr Jonas.

CMCRC is also working on an application targeted at the public health sector, which is about to migrate to an activity based funding model administered by the newly formed Independent Hospital Pricing Authority. Mr Jonas said that the same algorithms developed to identify exception data in health insurance or financial markets could be used to provide valuable intelligence and transparency to public health administration.

The CMCRC plans to deploy this system in 2012.

The organisation also announced it had recently completed the full commercial implementation of its claims scoring and predictive modelling application into Australia's largest workers' compensation insurer. The solution, which evolved from a three-year collaborative R&D project with the company, which CMCRC has not named, enhances the management of claims through prediction of costs and return-to-work outcomes at an individual claim level.