Episode 55 – Combating Fraud, Waste and Abuse in Employee Benefits

Mike Stull (0:09)

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On today’s episode, I’m joined by Mandy Rhubin, senior director, pharmacy network audit at OptumRx. Mandy, welcome to the show, and to kick things off, why don’t you tell us a little bit about yourself and what you do at Optum.

Mandy Rhubin (0:59)

Thanks for having me. Hi, my name’s Mandy Rhubin. I’m a senior director at OptumRx on our Pharmacy Network Fraud, Waste, and Abuse (FWA) Audit team.

I’ve been in the pharmacy industry for nearly 25 years, including with OptumRx for over 17 years now, conducting and managing pharmacy FWA audits and investigations. In my current role, I lead the partnership with our clients, all things related to pharmacy fraud, waste, and abuse. I collaborate closely with our clients on strategic initiatives that will maximize prescription drug affordability through pharmacy audits and savings and recovery efforts.

I obtained my MBA in Healthcare Management and a Bachelor of Science in Health Administration from the University of Phoenix. I am also an accredited Healthcare Fraud Investigator through the National Healthcare Anti-Fraud Association and a certified pharmacy technician through the Pharmacy Technician Certification Board.

Mike Stull (1:53)

Excellent. Thank you. So, a lot of talk this year, particularly in the political realm about wastefulness in overall healthcare spending, and certainly from an employer perspective and their fiduciary roles, making sure that wasteful spending isn’t happening or isn’t occurring within the benefit plans.

So, to get us started here, talk to the audience a little bit about what the difference is between the terms fraud, waste, and abuse.

Mandy Rhubin (2:27)

Per the Department of Health and Human Services Office of Inspector General, fraud is an intentional or deliberate act to deprive another of property or money by deception or other unfair means. Waste includes practices that directly or indirectly result in unnecessary costs, such as overusing services, and abuse includes actions that may directly or indirectly result in unnecessary costs. So, those key traits, fraud, intentional and illegal, waste, unintentional but avoidable, and abuse may not be intentional fraud but is still improper.

Mike Stull (3:04)

Excellent. I like that. I like how you broke that out.

That’s a great way to think about it. So, let’s talk about the intentional and illegal piece, fraud. Give us an example of fraud that occurs within the health plan.

Mandy Rhubin (3:21)

So from a pharmacy FWA audit perspective, examples of suspected fraud are things like phantom billing or billing for services not rendered, like if a pharmacy bills medications with no intent of dispensing the medication to the member or billing a brand name drug product but dispensing the generic to a member.

Mike Stull (3:41)

Yeah. So, clearly, things that are intentional in terms of misrepresenting the services that they provided to clients, and interestingly, I know I’ve read recently about some big investigations by the FBI as it relates to fraud in Medicare and Medicaid, and so, I mean, hundreds of millions of dollars. Hopefully, that isn’t occurring as much under the commercial plans, but it’s good to know that PBMs are checking for that on a regular basis.

Now, waste, waste seems more regular. Are there common examples of waste in the pharmacy plan?

Mandy Rhubin (4:26)

Yeah. From a pharmacy FWA audit perspective, some examples of waste include overbilling of quantities prescribed where a pharmacy submits a higher quantity than what’s dispensed to the member. Another example being duplicate therapies where a pharmacy adjudicates claims for multiple drug products within the same therapy or for the same condition or purpose that a member does not need to take together and may be a patient safety concern if taken together.

One more example is auto refills when a pharmacy has a member’s medication on autofill and doesn’t stop those refills when a member has either discontinued a therapy or has an adverse reaction and must stop taking the medication.

Mike Stull (5:08)

The auto refill piece is certainly one that I think a lot of plans can relate to. Okay. Last one, abuse.

So this one seems a little trickier. Talk to us a little bit about abuse.

Mandy Rhubin (5:27)

Yeah. Again, from a pharmacy FWA audit perspective, an example of abuse would be something like inappropriate use of overrides. In this case where pharmacies might enter overrides on rejected claims to allow claims to adjudicate and pay without the appropriate documentation or authorization.

Mike Stull (5:46)

All right. So talk to us. So, we’ve got a clearer picture, you know, what’s fraud, what’s waste, what’s abuse.

Talk to us about the responsibilities of plan sponsors and monitoring and controlling for these things.

Mandy Rhubin (6:02)

Yeah. A few thoughts here. One, oversight, meaning vendor oversight.

Monitor the PBMs, the TPAs, and other vendors to ensure that they have robust FWA controls in place. Another way, prevention by way of education and training. Provide regular FWA training to employees, providers, and members.

Also, detection through hotlines and reporting mechanisms. Maintain confidential channels for reporting suspected FWA. And lastly, investigation and response.

For example, investigate suspicious activity and collaborate with your internal and external audit teams or investigators. And also report those findings. Notify any regulatory bodies when required.

For example, the Centers for Medicare and Medicaid Services or the Office of Inspector General.

Mike Stull (6:54)

Good points. So, I know a lot of clients rely on their PBM to help them identify fraud, waste, and abuse. Talk to us a little bit about how Optum helps clients meet those responsibilities.

Mandy Rhubin (7:09)

So our mission in the pharmacy FWA audit team is to audit and monitor prescription claims submitted by OptumRx’s network of pharmacies to detect and prevent FWA and to ensure accuracy, appropriateness, and compliance. So how do we accomplish this? This is accomplished by the multiple audit types I alluded to earlier, which we perform on pharmacies.

One being our real-time audits, which are pharmacy claim reviews and is a leading differentiator in the pharmacy audit industry. 100% of paid claims are run through predefined algorithms and are risk scored within seconds of claim adjudication. The highest risk claims are then triaged to our auditors who evaluate the claim and, if questionable, will conduct outreach to the pharmacy within minutes.

The pharmacies are asked to verify the claim’s accuracy against the actual prescription. And if any inaccurate claim submission is identified, the pharmacy reverses and resubmits the claim. In a majority of these cases, the correction results in cost savings for our clients.

And that claim correction often occurs prior to the member even picking up their prescription from the pharmacy. Now we also conduct retrospective desk and onsite pharmacy audits. All of our retrospective pharmacy audits utilize machine learning and artificial intelligence technology to select pharmacies and claims that are at the highest risk for FWA.

With our extensive historical database and experience with pharmacy audits, the data was utilized as the risk features for our predictive model. Then, as new trends, patterns, and new fraud schemes emerge, we retrain the ML models so that as new claims are submitted and risk scores are updated, it allows for faster identification of pharmacies at high risk for submitting discrepant claims. Our models are retrained on an ongoing basis, and the audit results are often utilized and fed back into the model, leading to a dynamic and constantly evolving ML capability.

And last but certainly not least, our investigative audits. Like our retrospective desk and onsite audits, our investigative audits are using AI and ML technology to identify pharmacies at high risk for submitting potentially fraudulent claims. Our pharmacy fraud model works by evaluating pharmacy claims using thousands of fraud features, then aggregates that information and assigns a risk score to the pharmacy.

Pharmacies with the highest risk scores are routed to fraud investigators for further review. The use of AI and ML technology combined with our audit and investigative expertise leads to overall better timing and accuracy in the selection of pharmacies and claims to audit and helps us proactively stay ahead of the various and evolving fraud schemes.

Mike Stull (9:55)

I think it’s really interesting the way that AI is being used in detecting fraud. And I know I heard you talk a little bit about AI and from my experience sitting on a board of a dental insurance carrier, we talk about detecting fraud and AI makes it really easy, for example, on the dental side to identify when a dentist actually submits the same x-ray. You know, if they wanted to put a crown on a tooth, they have to submit imaging, and we’ve found specific cases where the same x-ray from 10 years ago was submitted with a case.

And with AI now, you don’t have to go back and flip through a bunch of imaging to see, you know, AI catches it like that, that, hey, this is a duplicate. This is already in our system. So it’s just interesting how, you know, whether it’s pharmacy, whether it’s dentistry, whether it’s healthcare, on the medical side, this is out there, and we continue to get better tools in order to try to combat some of it as it’s out there.

So I guess before we started recording, you talked about, you know, having some statistics in terms of what you’re finding in this area. Go ahead and share some of those with the audience.

Mandy Rhubin (11:31)

Yeah. So in closing, I’d like to share how OptumRx has leveraged AI in 2024 to significantly enhance our fraud, waste, and abuse audit capabilities, delivering measurable value to our clients. By integrating AI into our audit processes, we saw 173% increase in financial recoveries per investigative audit, jumping from $30,000 to $80,000 per investigative audit.

As a result of our pharmacy fraud models ability to flag potentially fraudulent pharmacies earlier, we saw 116% increase in cost avoidance. This results in bad actors being removed from our network faster, preventing further inappropriate and potentially fraudulent billing and protecting our clients. We also achieved a 53% year-over-year increase in total audit recoveries.

We saw $138.4 million in recoveries in 2023, and that grew to $211.8 million in 2024 in savings and recoveries. And lastly, in 2024, through our pharmacy FWA audits and reviews, we generated over half a billion in savings and recoveries for our clients. And 100% of those savings and recoveries go back to our clients.

Mike Stull (12:49)

It’s just a crazy number, right? Half a billion dollars. And I know in the grand scheme of things, you know, from a percentage perspective, it’s not necessarily a huge, huge number, but or a huge, huge percent, but it’s still a big number.

And it’s just it’s crazy to think that that kind of waste is out there. So kudos to you, Mandy, and the team at OptumRx for the work that you all do really behind the scenes to make sure that we’re flushing this out of our benefit plans. And I know fraud, waste, and abuse isn’t always the coolest thing to talk about out in the marketplace, but it’s certainly a critical component of running the benefit plan, and particularly in today’s environment where we’re talking more and more about fiduciary responsibility of plan sponsors, this becomes a more and more important and critical aspect of overall plan management and plan administration for employers.

So, I appreciate you taking the time to join us today and clearing up the difference between the terms of fraud, waste, and abuse and telling us a little bit about how you do it and what you’ve achieved.

Mandy Rhubin (14:15)

Thanks for having me.

Mike Stull (14:18)

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