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patients but to providers and insurers who want to capitalize on the market’s future growth potential. It is becoming a major challenge for not only state and federal governments, but also private insurers to finance the long-term care needs of an aging population. Although Medicaid and Medicare finance a majority of long-term care services, individuals who can afford long-term care insurance are discovering that the current products have strict qualification standards, limited benefits, and high premiums. For a variety of reasons, private insurers have either dramatically scaled back their product offerings or left the LTC marketplace altogether. First, the rapid growth of claim benefit payments and the longer life expectancy of elderly adults have made it difficult for insurers to manage profits and hedge risks across their entire business platform. LTC insurers paid nearly $7.5 billion in claim benefits to 273,000 individuals in 2013—up from $6.6 billion the previous year—while total benefit payments A HOLISTIC APPROACH TO IDENTIFYING FRAUD IN THE LONG-TERM CARE MARKETPLACE



Long-term care (LTC) is different from acute and primary care services because it also encompasses an individual’s social and emotional well-being. Long-term care can include home- and community-based care that not only addresses a patient’s physical well-being, but also his/her ability to continue to live independently. The approach to long-term care has been disjointed between providers, patients, and insurers and the result has been a continued escalation of costs. Since long-term care involves a variety of areas and the push to coordinate these services is well underway, the next step is to ensure that individuals maintain the best quality of life while minimizing costs (Figure 1). As financing long-term care services becomes more expensive for insurers and individuals, a holistic and integrated approach to long-term care becomes essential to not only

1. “Long-Term Care Insurance Industry Paid $7.5 Billion in Claim Benefits.” American Association for Long-Term Care Insurance, 14 Feb. 2014. Web. 12 Jan. 2015. 2. “Long-Term Care Insurance Not Covered By Obamacare Provisions.” American Association for Long-Term Care Insurance, 12 Aug. 2013. Web. 11 Sept. 2014.


Adult day care centers, IHSS and meal distribution are examples of services available to patients to remain independent INSTITUTIONAL LONG-TERM CARE SERVICES SNFs and other residential care facilities

administer long-term care to patients who can no longer live

independently A patient’s long-term care plan

involves a variety of needs that blend social support services and

medical care


Family members, nurses, and other providers serve

as the primary caregivers for patients in their homes



increased by 13 percent and the number of LTC insurance policyholders grew by 3.4 percent.1,2 Secondly, low lapse rates in the long-term care industry coupled with the U.S. Treasury’s interest rate policies have significantly impacted the LTC market.3,4 Private insurers utilize member premiums as investment capital in order to generate returns to pay for future benefits. The interest rate environment and the low lapse rate have made it difficult for private insurers to generate a significant return, without enacting a riskier investment strategy, to counteract its benefits cost.

Lastly, the higher incidence of fraud among potential applicants and home- and community-based care facilities has also driven up costs for insurers. For example, applicants will omit certain health information in order to meet the strict underwriting standards. On the provider side, compared to SNFs, low barriers to entry, lax regulations, and infrequent

oversight have made home- and community-based care facilities targets for fraud. The lack of oversight creates many opportunities for improper billing practices such as: 1) billing for services that were not given, 2) providing a patient with a false diagnosis in order to perform more expensive or additional services, 3) forging or changing bills or receipts and submitting them for reimbursement, and 4) billing more than once for the same service.5



Optimity understands LTC fraud issues are complex and require both a proactive approach to mitigating risk and a reactive approach to addressing payment errors. Optimity LTC Fraud Solution (OLTCFS) employs a three-phased strategy—at the applicant, member, and billing cycle level—to tackle fraud and recover payment.

3. Gleckman, Howard. “What’s Killing The Long-Term Care Insurance Industry.” Forbes. Forbes Magazine, 29 Aug. 2012. Web. 14 Dec. 2014.

4. “Federal LTC Plan Details and Long-Term Care Insurance Introduction to LTC and LTCI.” LTC Basics. Federal Long-Term Care Insurance Program, Aug. 2010. Web. 12 Jan. 2015. 5. Linder, Justin C. “Fraud Claims against Hospice Providers Increase.” Fraud Claims Against Hospice Providers Increase. Executive Insight, 3 Nov. 2014. Web. 12 Nov. 2014.

Phase 3: Billing Accuracy at the Provider Level OLTCFS

Predictive Analytics Engine

Phase 1: Identify Risk at the

Applicant Level

• Compare underwriting decisions with a quantifiable number and track the score through the LTC benefit cycle • Integrate applicant historical data into analytics engine based on existing forms and underwriting guidelines • Identify fraud patterns based on historical applicant response and diagnosis

• Generate questionnaire for the care manager to evaluate member diagnosis and eligibility • Integrate accumulated data from Phase 1, paid claims history, and ADL assessment to improve predictive analytics engine

• Identify providers and member billing errors

• Assess and develop enhancement recommendations for the recovery process • Identify behavioral triggers to aid fraud prediction and detection

• If necessary, develop additional billing protocols for members and providers Phase 2: Monitor Results at

the Member Level

Phase 1:

Phase 2:

Phase 3:


Traditionally, companies monitor snapshots of data during an applicant’s process. OLTCFS views fraud and recovery holistically and longitudinally, capturing an individual’s data from initial application, to claim initiation, and through the billing cycle. The data is then used to generate predictive behavioral attributes that can be applied to the next cycle of applicants in order to identify fraud more quickly. The OLTCFS team offers a complete fraud and recovery program that is customized based on each company’s internal processes.

Since no two companies operate identically, Optimity believes the key to a successful solution is to customize this proprietary risk model based on the client’s underwriting guidelines. Unlike the standard process, the OLTCFS team will monitor an individual through their LTC benefit cycle. For example, a traditional LTC assessment evaluates deficiencies in an individual’s activities of daily living (ADL) and determines the presence or absence of cognitive impairment. Using the risk score combined

with the ADL and Cognitive probability scores, Optimity will recommend either additional ADL or Cognitive questions based on the member’s application responses in Phase I. The nurse assessor will be made aware of the information from Phase I and be notified to focus on specific areas while assessing the member.

Optimity’s claims accuracy tool provides our clients with a retrospective analysis of paid claims by reviewing all member benefit and provider contracts to determine their benefit allowance or billing schedule. To recover fraudulent claims paid, Optimity analyzes claims data and compares the information to those of members and providers who have allegedly committed fraud. The OLTCFS team will collaborate with the client to develop a specialized process to recover the paid claims in a timely fashion. When a client implements all three phases of the OLTCFS tool (Figure 2), the risks of providing LTC insurance can become less daunting to manage.

• Member submits bill for reimbursement • Provider submits claim

Insurer processes claims and pays member or provider accordingly

Claims data delivered to OLTCFS team

OLTCFS team analyzes claims data, provider contracts, member benefits and underwriting guidelines Phase 3:

Identified discrepancies are delivered to the insurer for further investigation

Insurer conducts investigation

Insurer initiates claims recovery process or fraud reporting process

Paid claims data is fed into the OLTCFS Predictive Analytics Engine




As the Baby Boomer generation continues to age, there is a unique opportunity to capitalize on the future demand for LTC insurance products. Unfortunately, private insurers are facing a myriad of complex issues that are currently impacting their business model, profit margins, and product offerings. Optimity’s Long-Term Care Fraud Solution has the capacity to address these challenges by helping insurers mitigate their current risks and plan for a future that capitalizes on the market’s potential. Fraud has plagued the industry for a number of years but Optimity’s three-phased approach will provide insurers with the tools they need to remain in the LTC marketplace.

Optimity Advisors is a collaborative firm that works alongside its clients to develop customized solutions to meet their unique challenges. We analyzed the market and recognized the need to create tools that keep pace with the evolving needs of business. The OLTCFS tool is just one example of the services we offer to our clients. Optimity can help transform your business with flexible, dynamic tools that keep pace with today’s ever-changing insurance landscape. ABOUT OPTIMITY ADVISORS

Optimity Advisors is a rapidly growing, multi-industry strategy, operations and information technology advisory firm with multiple locations throughout the United States, United Kingdom and Europe. We specialize in the critical set of services that sit between high-level strategy and delivery and execution. We provide a strategic outlook through proven methodology, knowledge and instinct, helping to craft an actionable future vision that aligns with your long-term goals and objectives. We bring an end-to-end industry understanding to help you rise above the day-to-day, focus on the opportunities ahead and align your organization for success.


Kristin Patterson

Kristin Patterson is an Associate based out of the Optimity’s Los Angeles Office. Kristin’s consulting and industry experience with commercial, managed care and long-term care plans has focused on operations and system implementation projects. She has also expertise in projects involving market strategy, end-user training, requirements management, vendor procurement, user-acceptance testing and end-to-end test strategy development. PARTNER CONTACT Kenneth Barrette 1600 K St. NW, Suite 202 Washington, DC 20006 Direct: 202.341.2651 Main: 202.540.9222 Fax: 202.540.9223





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