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Combating healthcare fraud, waste and abuse … For the benefit of all  

The analogy I always like to use is that of a stokvel, which operates as a contribution-funded saving scheme to benefit its members; a medical scheme is similar and offers financial assistance when its members are at their most vulnerable. The healthcare funders have a responsibility towards their members to serve their interests in a cost-effective and efficient way to provide access to equitable quality healthcare benefits. This is what the Principal Officer of the Government Employees Medical Scheme (GEMS) Dr Stan Moloabi and his team have been tasked with. The problem is that the sustainability of delivering on these objectives becomes increasingly difficult amid rising costs and the negative effects of fraud, waste and abuse in the healthcare sector.

GEMS strives for excellence in everything we do. The aim is to operate as a sustainable and effective medical scheme that drives transformation in the healthcare industry, aligned with the principles of universal healthcare coverage. All of this, while promoting member wellbeing by providing equitable access to affordable and comprehensive quality healthcare. As a closed medical scheme, only government employees contracted in terms of the Public Service Act are eligible to become scheme members.

Since its inception in 2005, GEMS has grown to cover more than 760 000 public service employees working across various government departments and over two million beneficiaries. We are the largest closed medical scheme in South Africa, and the second largest medical scheme in the country, after Discovery Health Medical Scheme.

Being a third-party payer puts medical schemes at risk of abuse

Fraud, waste and abuse in the healthcare sector are not new; for as long as medical schemes have existed, there have been those who have abused the system. Against the backdrop of a global pandemic, scarcity of resources and increasing costs these conversations are now more important than ever.

Moloabi says the very nature of medical schemes as a third party payer makes the system a target for and vulnerable to unethical and illegal dealings, as seen across all types of insurance environments globally.

“A member approaches a healthcare provider or healthcare institution that then provides a service or medical intervention, and submits the claim to the medical scheme, which acts as a third party payer,” he explains. “There are minimum requirements for how claims are processed and validated. The scheme, as a third party payer, does not see the services offered first-hand; payment is made because there is an element of trust involved — with our members and also the service providers in question.”

To avoid becoming involved in fraud, waste and abuse in the healthcare sector, Moloabi says it is important to first understand how these concepts differ. Fraud entails knowingly submitting or causing submission of false claims, or intentionally misrepresenting the facts in order to access payments of a benefit that one would not otherwise be entitled to. Waste and abuse, in this context, involve claiming for healthcare treatments and services that are not absolutely medically necessary.

This includes acts of over-servicing or over-charging a patient by misusing claim codes or charging excessively for services, supplies or medical appliances or devices. It also entails unethical behavior, which is considered contrary to best practice. By choosing to get involved in unethical or illegal dealings, both members and providers can expose themselves to sanctions, penalties and criminal or civil liability.

Illegal and unethical practices disadvantage all

The concept of fraud, waste and abuse in the healthcare sector has adverse effects for everyone. Moloabi explains: “The medical scheme is impacted negatively because it now has to pay more for — or for more — medical claims than it was supposed to. For example, we could have paid out legitimate claims to the value of R100 000 that were necessary and appropriate, but end up paying double on claims that fall under either of fraud, waste or abuse.”

This, he says, impacts the other scheme members who are paying their contributions into the pool of funds, only to have that money go towards fraudulent or wasteful claims. “This means that the scheme contributions are higher than they should be and may be subject to higher increases, because the scheme is paying more from the pool than it should be.

“This also has an important impact on healthcare providers and healthcare facilities, because we are faced with a situation where all healthcare providers may be painted as being involved in fraud, and the system of trust is eroded,” he says. “This is tragic, because only a small percentage of providers are involved in fraud, waste and abuse. Unfortunately, the entire industry is painted with the same bad brush.”

He says GEMS is taking steps to ensure that members are educated and their interests are protected. “We also engage with healthcare providers to remind them that it is their responsibility to act in the interest of our members, and the members of other schemes who are their patients and are contributing to the pool of funds each month,” he explains.

Because fraud, waste and abuse in the healthcare industry can play out at a number of levels — from the members themselves to officers working for the scheme, to the various service providers involved in delivery healthcare — multi-stakeholder collaboration is critical to tackle the problem.

GEMS employs a variety of systems that make use of analytics, algorithms and nowadays we talk of artificial intelligence to identify areas of concern. “We also have a fraud whistleblower hotline, where anybody can phone in to report suspected fraudulent activity. This can include anything from a lost card being used fraudulently to large-scale syndicates operating in the healthcare space.”

Education and collaboration critical for success of ‘medical stokvel’

Education is key to ensuring that members and service providers are onboard and understand the need to protect the integrity of the medical scheme — both for their own benefit and for the benefit of others. “Members particularly need to know that they are contributing to a pool of funds, and must be educated about why this is a system that works and what they are entitled to by taking part in preserving the funds. We can think of this as a medical stokvel. We pool our money and you might not see the dividends every month or even every year, but it is always there for you when you are at your most vulnerable and need it most.”

At the end of the day, he says, GEMS as a medical scheme must be run as a business, albeit a not-for-profit business: “And the core objective of this business is to always act in the best interest of its members. They have put their trust in us as officers of GEMS to protect their money and ensure it will be available when they become sick or injured.”

Of course, he says, there may be the temptation to want to get something back, but this is not the right mindset to have: “Think about it in a different way. If you have been contributing R2 500 per month — that is R30 000 per year — and maybe you haven’t claimed a single time. Over five years, you have contributed R150 000, which is a lot of money. But let’s say you are involved in a motor vehicle accident that lands you in ICU and racks up a bill of R1.2-million — whether you have contributed for a year or for five years — you will have peace of mind to know that you are covered, and that is because of the pooling effect that schemes offer.

“Contributing towards this pool of funds is like paying for insurance; most people do so as a ‘grudge purchase’, hoping they will never make use of it — meaning they remain healthy — but not knowing when they might need to,” he says. “And when you do find yourself in need, you appreciate those pooled resources! This is what our members must know — we all have a responsibility to defend our ‘medical stokvel’.” — Jamaine Krige


GEMS’ strategies for sustainability

Organised crime syndicates operating from the back rooms of rural pharmacies, shady “ATM doctors” who run lucrative cash-withdrawal practices and “time-bending” providers who bill for hundreds of hours of work each day — these are just some of the scams that have been uncovered since the Government Employees Medical Scheme (GEMS) introduced its Claims Management Programme in 2016. Since then, GEMS has saved more than R5-billion that would otherwise have been lost to fraud, waste and abuse.

The Claims Management Forum that was implemented in the same year has contributed to the significant and consistent growth of the scheme’s reserve ratio. Risk mitigation measures such as early warning reporting and underwriting have lowered the impact of fraud, waste and abuse and succeeded in rerouting funds that would have been lost to improve the lives of GEMS beneficiaries during their darkest hours.

According to the GEMS 2021 Annual Report, the scheme’s Fraud, Waste and Abuse (FWA) Programme has resulted in widespread success, with particular progress being made in KwaZulu-Natal, where the most irregular claims have originated from. 

Through the courage of whistleblowers, tip-offs from the public and the proactive analytics and trend monitoring systems of GEMS, the scheme has managed to identify and investigate many allegations of fraud, waste and abuse and take action to bring the perpetrators to book. 

But while these victories are cause for celebration, unethical and illegal practices continue to pose a significant risk across the industry. 

Putting a stop to shady practices

While the price of medication in South Africa is regulated, this is not the case when it comes to orthopaedic aids and other medical devices. Some unethical providers take advantage of this, charging up to 10 times more than the actual price of the device. Others attend “wellness events”, only to bill the medical aid for full consultations instead of screenings. 

GEMS also identified pharmacies that claimed exclusively for high-cost medications while providing patients with cheap generics, while another pharmacy syndicate was uncovered that was submitting excessive claims for members, some of whom lived hundreds of kilometres away. In some cases, “hard-working” doctors, psychologists and nutritionists submitted claims for between 50 and 100 billable hours — all for patients allegedly seen on the same day! 

These are the types of cases that the scheme’s internal analytic systems have been particularly successful in flagging. On average, GEMS investigates between 40 and 60 cases each month. Most of these relate to pharmacies, with GPs, dieticians, physiotherapists and registered nurses coming in close behind. The highest number of cases are seen in KwaZulu-Natal, Gauteng and Limpopo respectively.

How investigations work

GEMS takes a zero-tolerance stance when it comes to fraud, waste and abuse, prioritising prevention, followed by loss recovery and sanctioning of offending parties. The scheme has implemented extensive controls to prevent and detect fraud, with a commitment to investigate every reported claim and any red flag that may be raised. There are also mechanisms in place to impose strict sanctions in the case of proven infractions, and to explore other remedies when justified, including education, rehabilitation and reintegration. 

When flagged, a case will be screened and evaluated, and may then be subject to investigation by the scheme’s contracted forensic investigators before being referred to other stakeholders who might be affected, such as industry regulators and employers. The investigation often includes an interview with the healthcare provider and with the patient, and may require access to patients’ files to examine the veracity of the claims that are under investigation.  

If, however, claims are found to show waste or abuse, but not fraud, then healthcare providers are approached and engaged with in order to ensure a return to best practice and acceptable standards of operations. Often, providers are required to pay back any money that they owe the scheme, and if they do so are often allowed to continue working with the scheme.  Suspension is a last resort, and is usually the result of practitioners refusing to engage or cooperate with the scheme’s forensic investigators. 

In serious cases though, perpetrators must be brought to book. Medical schemes do not have the jurisdiction to discipline, fine or prosecute health practitioners, but they can report them to the police or to statutory and regulatory bodies for further action. Should the investigations find sufficient evidence of criminal action, the case is then referred to law enforcement authorities for criminal prosecution, or to the courts for civil action.

In addition to these measures, GEMS conducts internal and external awareness and training sessions as a means to aid prevention and to equip members, healthcare professionals and scheme officers to identify and report irregularities. These training and awareness initiatives include education regarding what constitutes fraud, waste and abuse, guidance on reporting procedures, and information about the harmful impact of these practices on the scheme and its members. Training is also provided for healthcare providers on scheme tariffs and billing codes to enhance other preventative controls.

In doing so, GEMS remains committed to protecting the interests of its members and the integrity of South Africa’s health sector as a whole. — Jamaine Krige


Fraud, waste and abuse prevention starts with you

The Global Health Care Anti-Fraud Network (GHCAN) estimates that approximately 6% of global healthcare spending is lost on fraud annually. In South Africa, the Council for Medical Schemes (CMS) estimates that fraudulent practices cost the medical aid industry and its members between R22-billion and R28-billion each year. This means that around one quarter of all premiums paid by the 8.8-million South African medical aid members goes towards fraudulent activity. According to the Government Employees Medical Scheme (GEMS), fraud ultimately leads to increased contributions by members — if no such fraud existed, medical aid rates could come down by as much as 25%. 

The direct consequences of fraud include, but are not limited to: direct financial losses to the members of the scheme, the cost of investigations, legal costs and reputational damage, both to individuals and the healthcare sector at large. Money spent on fraud, waste and abuse in the healthcare sector means there is less money available to cover legitimate medical expenses. 

According to the CMS more than half of fraud cases are uncovered because of tip-offs by patients, while the rest are discovered by applying analytical and statistical algorithms to highlight irregularities. Perpetrators of fraud — which can be defined as the intentional deception or misrepresentation for financial gain or other benefits — include healthcare service providers, medical scheme members, employees, brokers and syndicates. 

Member fraud

Fraud committed by medical aid members can take various forms. The most common includes not disclosing a previous medical condition when joining the scheme, or withholding medical information to receive lower premiums or better benefits. 

It can also include submitting false or altered invoices, colluding with service providers to provide false claims, and dual membership, which entails belonging to two medical aids at the same time. Member substitution, in which a person who is not a dependent on the medical aid claims benefits using someone else’s card or details, is also a big problem. 

Fraud by service providers

When it comes to service providers, code manipulation is a common way of defrauding the scheme. In these instances, service providers charge for more expensive products and procedures than the ones provided, or add procedure codes to a bill for services that have not been provided. 

They may also claim for non-covered benefits by submitting codes for services that would be covered under the scheme option. Service providers may also charge for original medications while providing patients with cheaper, generic options, or substitute merchandise by supplying one device while billing for a much more expensive one. 

GEMS has also investigated a number of “ATM practices”, where service providers submit claims for services they do not render, keeping a portion of the payout for themselves but providing members with a portion of the claim as a cash payout. 

Not worth the risk

When a member commits fraud, they face having their medical aid membership terminated, meaning that they will no longer be covered in the event of an illness or injury. The claims in question will be reversed and the member will be liable to pay them, and will be subjected to criminal and civil proceedings. In addition, the fraud will be reported to the member’s employer, especially in cases where a portion of the medical aid is subsidised. This could lead to disciplinary action at work, and even dismissal. — Jamaine Krige

Prevent fraud: protect your benefits

While some medical aid members are actively involved in defrauding their scheme, many are unsuspecting victims who are unaware of the unethical and illegal dealing taking place. “As a member, you can play a part in the prevention of fraud, waste and abuse,” says Dr Stan Moloabi, Principal Executive Officer of the Government Employees Medical Scheme (GEMS). 

The best way for members to protect their benefits is to report any suspicious activity. Members should analyse their statements carefully each month to make sure that all charges have actually been provided. “Make sure that your claims are correct, and that you have received all the claims that have been submitted,” he says. “For example, you might get an SMS or see on your statement that there is a claim from a healthcare provider that you do not recognise, so you check with your family members, and if they have not received a service either, this must be reported.” 

Often these types of transactions are linked to identity theft, or as a result of lost or stolen cards. “Never share your medical aid details like your membership number or membership card with anyone, and always report and replace your card in the event that it is lost or stolen,” he urges. “Always keep your medical aid number and medical aid card in a safe place.” 

There is no scenario where a member should be accepting money in exchange for a claim made on their medical aid, he adds. Also, never accept free products or services unrelated to your claim in exchange for your medical aid card or details. “Remember, by protecting the integrity of the medical scheme, you are protecting your own contributions, your own benefits — and your own health,” he says. 

Any suspicious activity can be reported anonymously to the 24-hour toll-free GEMS Fraud Line on 0800 21 22 02. A call-back request can also be logged by sending an SMS to 30916, or emailing [email protected]

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