January 18, 2010

Report Shows Healthcare Fraud Wastes $260 Billion Globally

Healthcare experts said on Monday that some $260 billion is lost globally every year to fraud and error in healthcare -- enough to quadruple the World Health Organization's and UNICEF's budgets and control malaria in Africa, Reuters reported.

In fact, some 5.59 percent of annual global health spending is lost to mistakes or corruption, according to a study by the European Healthcare Fraud and Corruption Network (EHFCN) and the Center for Counter Fraud Services (CCFS) at Britain's Portsmouth University.

The European Healthcare Fraud and Corruption Network was set up to help the region's healthcare organizations find and cut losses on fraud and error so that more money could be better spent on patient care. Similar networks also exist in the United States.

Paul Vincke, EHFCN's president and one of the report's authors, said every dollar lost to fraud or corruption means that someone, somewhere is not getting the treatment that they need.

"They are ill for longer, and in some cases they simply die unnecessarily. Make no mistake -- healthcare fraud is a killer," he added.

Data from 69 exercises in 33 organizations in six countries were used to measure healthcare fraud and error losses.

Experts extrapolated their findings from Britain, the United States, New Zealand, France, Belgium and the Netherlands to get a global picture. They found that the combined expenditure assessed was more than $490 billion.

However, the authors said that data from developing nations would not have changed the global figure, but were hard to come by, since the study included only exercises based on statistically valid samples with measurable levels of accuracy.

Evidence for many different types of fraud were highlighted in the report: from pharmacists dividing prescriptions into small packages to claim extra fees, to drug companies organizing price cartels, to doctors over claiming travel costs and abusing government grants, to patients making fraudulent insurance claims.

The U.S. healthcare system wastes between $505 billion and $850 billion every year, with around 22 percent of that going on fraudulent insurance, kickbacks for referrals for unnecessary services and other scams, according to a Thomson Reuters report published last October.

The World Health Organization's latest estimate of global healthcare expenditure was $4.7 trillion. The fraud report's 260 billion-loss figure is based on an average of 5.59 percent of spending being lost to fraud.

Monday's report proved it was possible to measure the nature and extent of losses to fraud and error, which is vital to tackling the issue, according to Jim Gee, chair of the CCFS.

"It may be embarrassing for some organizations to find out just how much they are losing. Because of the direct, negative impact on human life of losses to fraud, it is never easy to admit they take place," Gee said in the report.

But he warned that the first step to combating fraud was for governments and institutions to stop "being in denial" about it.

"If an organization is not aware of the extent or nature of its problem, then how can it apply the right solution?"


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