But Keckley warned government officials to be careful about how they introduce predictive modeling programs to doctors wary of states meddling in treatment. He said these initiatives could be more attractive to doctors if states connected tax incentives to them, or subsidized purchases of electronic medical records systems for doctors.
Equally important is that states avoid using Medicaid tracking and management systems to publicly rate physician performance, said Keckley.
"[It's critical] that this does not become a platform for writing report cards that are in the newspaper on which doctors get the best results, that it doesn't become a basis for transparency and performance reporting," Keckley said.
He said that would likely result in doctors only choosing Medicaid patients who they thought would improve their scores.
A Step Ahead of Fraud
Medicaid fraud is lucrative. Unscrupulous providers double-bill Medicaid programs for services, which can lead to significant extra costs. Patients, for example, trick the system into giving them narcotics they can sell on the street.
California made tracking this fraud a major IT agenda in early 2000, hiring EDS to handle the details. The Golden State now heralds its per-recipient Medicaid costs as the lowest in the nation. California routinely changes its tactics to keep pace with offenders, said Stan Rosenstein, deputy director of medical care services for the California Department of Health Services (DHS).
"When you approach fraud and abuse, the people who are committing it get much more sophisticated. They change their patterns in reaction to us. They study us. They see what we're doing and change their fraud patterns to avoid what we're looking at," Rosenstein said.
He said tracking fraud was relatively easy at the beginning of the EDS partnership, because the crimes were less sophisticated. For example, the agency caught "phony providers" billing for services from "offices" that turned out to be empty lots. "Sometimes they'd just have a mail drop," Rosenstein said. "As we found the easy things, they got more sophisticated and used technology to get there."
In early 2007, the DHS implemented software to search for new fraud patterns that weren't yet familiar to agency analysts.
"In the past, we had to say, 'Here's a pattern of treatment,' and we'd profile for that known pattern [in the system]. The [new software] looks for the new patterns without us having to program it to say, 'Here's what we think could be happening,'" Rosenstein said. "It asks, 'Are they getting too many services? Are they getting services from multiple physicians? What's their emergency room usage? Are they getting lots of narcotics from going into the emergency room?' It's predictive. It tries to look at the behaviors that occur or could have occurred before we've identified the pattern. It will tell us what it believes to be an emerging fraud pattern."
Using predictive analytics, the software changes the agency's detection practices as offenders change methods. The system uncovered numerous fraud innovations. For example, the software notices when doctors give tests or treatment outside of their specialty.
"We found situations where a physician would always do the same set of tests when they saw [patients]. For example, they would do nerve conduction tests. Everybody they saw got a nerve conduction test, and the doctor wasn't a specialist in the area," Rosenstein said.
The system notices when a physician bills for more prescription drugs he or she had in supply. Red flags also appear when doctors perform excessive tests unrelated to symptoms reported for the corresponding patients. Some providers double-billed for visits using different billing codes for each visit. Multiple visits to providers by patients during the same day tipped off the system about that swindle.
"We were able to put a hard edit in our system to stop it,"