26 July 2012

Medical scheme fraud

Here are the most common ways in which both members and healthcare providers defraud medical schemes.


The healthcare sector is ‘robbed’ of between R4bn and R13bn every year through fraud, abuse and unethical behaviour, according to Liberty Medical Scheme (LMS).

LMS participated in the latest (third) industry-wide KPMG anti-fraud survey covering the period from 2007-2009. Among other things the survey revealed the following:

  • Fraudulent member claims represented a relatively small amount of R67.3m out of a claim value of R 145bn over the three-year period. 
  • Non-disclosure of prior ailments was the most common fraud reason cited for member fraud. 
  • Service provider fraud, however, is increasing with code manipulation being the most common type investigated followed by services not rendered.
  • Medical scheme administrator’s response to medical fraud reflects a crackdown on fraud in this industry over the last decade. In the first KPMG survey (covering 2001 to 2003), only 49% of medical aid administrators responded that they never keep quiet about fraud cases. By 2009 every administrator that responded to the survey indicated that fraud is now reported. This zero-tolerance approach is due to the efforts of dedicated forensic investigative units maintained by most medical schemes. The respondents have ranked their forensic units as a crucial fraud risk management tool, on equal footing with hotlines for whistleblowers.
  • Internal controls include maintaining a fraud policy, and a code of conduct, both of which have been consistently rated over the last three surveys as the best ways of tackling fraud, with the use of detection software also ranking highly.


Stressing LMS’ zero-tolerance approach to fraud and abuse, LMS Executive Principal Officer Andrew Edwards says the sad truth is that fraud and abuse of the system can – and does - occur just as regularly in the healthcare system and medical scheme industry as in any other environment. 

With the help of a dedicated forensic investigative unit, LMS keeps a close eye on any irregularities, dealing with it swiftly and efficiently, to the benefit of all stakeholders.

“Moreover, as many South Africans find it increasingly difficult to make ends meet, instances of fraud and abuse on all sides of the spectrum – from members, healthcare providers and employees, to intermediaries, administrators and trustees  – unfortunately appear to be on the increase. It is therefore paramount that we vigilantly monitor any suspicious conduct and claim, and act speedily and decisively to prevent the unnecessary loss of funds.”

He points out that a dedicated team of forensic specialists monitor, detect and investigate any instances of fraud or abuse and the team is strengthened by other clinical specialists in the business. “As a result, the team benefits from interaction and collaboration with these specialist areas within the business to enhance the fraud risk management activities,”  Edwards adds.

From a forensics perspective the focus is strongly on both prevention and detection. Through a dedicated KPMG Ethics Hotline, as well as e-mail and fax facilities, members/consumers are encouraged to report instances of suspected fraud and dishonest actions at any given time. In addition, all claims data are stored in a fraud data warehouse, while suspicious trends among both members and providers are closely scrutinised.

The investigative process relating to incidences where LMS is potentially exposed to fraud, constitutes focus on loss mitigation, the identification of perpetrators, disciplinary action, civil and criminal proceedings and process improvement. In instances where actions boil down to downright fraud, criminal charges may be laid at the SAPD, Edwards explains.

“Not at all uncommon, private healthcare fraud and abuse is a national problem affecting all of us, either directly or indirectly. This loss leads to increased costs for all stakeholders involved, everyone from funders and providers to medical scheme members. The ultimate cost of healthcare fraud, however, is felt the hardest by the scheme members, who pay the monthly contributions towards their medical cover. By vigilantly monitoring fraudulent behaviour and acting swiftly to bring culprits to book, LMS has managed to recoup significant amounts of money, to the benefit of our members,” Edwards concludes.

Read more about medical schemes.

(Press release from Liberty Medical Scheme, July 2012)


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