Canadian HR Reporter

CANADIAN HR REPORTER APRIL 2018 6 NEWS Fighting fraud Benefits fraud is costly business for all stakeholders, but there are several ways to fight back, according to a roundtable of experts BY SARAH DOBSON JUST over a year ago, St. Michael's hospital in Toronto dismissed 70 employees for alleged benefit plan abuse after a routine audit discov- ered $200,000 in irregularities. A few months later, the Toronto Transit Commission announced 170 employees had been dis- missed — or resigned or retired to avoid dismissal — while 10 former employees were facing criminal charges over their part in alleged benefits fraud. The stories, of course, made headlines. But they also put a much-needed spotlight on the costly issue of benefits fraud. While it's a problem many plan sponsors and insurance compa- nies contend with on a daily basis, it's still under the radar for many employees and the general public. e what and why of fraud So, what exactly is benefits fraud? Basically, it involves anybody who takes advantage of or abus- es or uses deception to exploit a company benefit plan, according to Gary Askin, assistant vice- president of fraud and risk man- agement at Sun Life Financial in Toronto, which sponsored a roundtable in February on ben- efits fraud, in partnership with Canadian HR Reporter. "There's abuse where some- body's just exploiting benefits within the parameters of the plan and it may not be illegal, and then there's other cases where… you may have members attending clinics that don't even exist, yet submitting receipts for it. So that would be a fraudulent benefit." Fraud is when a person purpose- ly misrepresents something and does it for financial gain, according to Shannon DeLenardo, director of anti-fraud and electronic claims at the Canadian Life and Health In- surance Association (CLHIA). "Generally, for fraud, it needs to be proven in a court of law, whereas abuse would be like you were saying someone who's really just exploiting their plan, using all their benefit coverage for a calendar year, regardless of whether or not they actually need the service medically." As an example, St. Michael's saw people who had a prescrip- tion for a particular benefit, such as orthotics, but came away with a designer purse from the pro- vider, said Mary Madigan-Lee, vice-president of HR, corporate health and legal at St. Joseph's St. Michael's Providence Healthcare. "ose are really hard to catch." ere are also companies that don't exist or have a business number, or might front as a sort of company but a visitor needs a certain person's name to get in the door. St. Michael's also saw prescription pads stolen from the hospital, she said. e other challenge, in Ontario for example, is clinics aren't regu- lated, said DeLenardo. "Anybody could open a clinic. You may be dealing with some- one who's not even a health pro- fessional at the front." Using analytics, Sun Life may see a spike in claims at one clinic and when it goes to investigate, find there are just four curtains and a table — with no business going on at all, said Askin. "e fraudsters are evolving to the point where it's easier for them to get into a legitimate clinic and then submit fake claims within that because they can hide it…. So anything that's hidden within multidisciplinary clinics." Sun Life has also seen fake as- sociations and fake providers, with fake schools and diplomas, he said. "All this fraud was designed to submit fake claims. And the ex- tent that they went to to carry this out is pretty staggering." But why would employees de- cide to get involved? "It's happening because some- body out there has rationalized it to them that it's not theft, that it's part of your plan," said Askin. "(ey say) 'It's budgeted for, don't worry about it. You didn't get a raise, so you can exploit the plan by doing this.'" When St. Michael's did its in- vestigation, some people said they knew their behaviour was wrong, but "not that wrong," said Madigan-Lee. "People can rationalize it in their own minds. I mean, they paid the ultimate price in losing their jobs. That's the ultimate price," she said. "From our house- keeping staff to nursing, it was right across the board." Detecting the fraud So, how exactly is the fraud be- ing detected? For one, analytics. The deeper you go, the better you can start to see trending, said Madigan-Lee. "It's a lot of work, though, to get in and really get underneath all of this kind of thing. And then be able to… bring it forward and start to talk to employees." As an example, the hospital started looking at employees' home addresses and where they were making purchases, and of- ten they were very far apart, which made no sense. There were also ringleaders throughout the hospital, with clusters around them, she said. "I don't think we actually be- lieved we needed to do this be- fore in such rigour. ere's a bit of naivety, I think, on our part that things are legitimate," said Madigan-Lee. "I remember the first person that we came across, that's what started the whole thing was in De- cember 2016. She had $22,000… for her whole family getting com- pression hose and orthotics — and anything else she could max out, she did. And that was telling, we were sort of all of a sudden not innocent on this front anymore. And so we began the investigation of all of that." But the investigation should be holistic, she said. "I don't think it's fair to just rely on the insurance carrier ei- ther. We've always done an audit but much more deeply in the last while. And then when we started to do this, we started to really partner with Sun Life. So I think, at a minimum… we will be audit- ing on an annual basis… in part- nership with Sun Life doing their audits on a regular basis." Sun Life has several data scientists working specifically with fraud to create alerts and red flags that pick up on these things, said Askin. "Years ago, insurance carri- ers had business rules and they would operate their analytics around that. Now, the move is towards machine learning and algorithm(s). So we're picking up on fraud from that perspective." The company also has ana- lytical reports that potentially can pick up on collusion-based schemes, he said. "We're looking at the geogra- phy as well, all the time, to see if it makes sense that they're going to the right place. It's a huge invest- ment but it's absolutely necessary and if you're not doing that, from an insurance carrier perspective, then you're getting hit very hard, or your clients are getting hit very hard as a result of that." e Ontario Provincial Police (OPP) has always had an anti- rackets branch that specifically investigates things such as cor- ruption and economic and health- care fraud, said Ted Schendera, detective sergeant in the anti- rackets branch at the OPP. "We have a detachment base, so if there's something on the lower side, then they would go through the detachment. But if it's some- thing that's going to be multi-ju- risdictional, then that's when they come to the anti-rackets branch." And each investigator is trained with basic courses as far as the fraud and search warrant pro- duction order and major case management, he said, "so there is that consistency." Within law enforcement, they try to share as much information as possible, said Schendera. "But we find that insurance companies, being the private in- dustry, it's so difficult sometimes where you get one insurance agent or insurance company that wants to share, like 'I need help,'" he said. "We don't have to look too far at this table and it's like we've got these things happening, and send- ing the alarms out (but) the other people are choosing to ignore it." The 2016 Supreme Court of Canada case of R. v Jordan — which put time limits on criminal trials — has also caused headaches for policing agencies, said Schen- dera, because the justice system is trying to deal with serious matters such as assaults and murders. "We're seeing those cases being prioritized over fraud. And it's so unfortunate that we go in and we've had frauds that we would take to a Crown attorney (but) they look at it and say, 'I don't know how we're going to do it. We don't know whether we're going to come up with the court time, we don't know how we're going to be able to represent this case effi- ciently.' And when I say efficiently, that's… the time period you have in major courts for stuff like that — you have up to 30 months to get that through the courts." e R. v. Jordan decision has se- riously impacted the ability to get fraud cases in front of the courts to stop these people and create a deterrent, said Askin. "While we wait for that, while we push for that, we have to look VETTED > pg. 8 A group of experts met recently to discuss the costly issue of benefits fraud. From left: Shannon DeLenardo of the CLHIA, Mary Madigan-Lee of Providence Health Care, Ted Schendera of the OPP and Gary Askin of Sun Life Financial. Credit: John Hryniuk "I remember the first person we came across. She had $22,000 for her family getting compression hose and orthotics — and anything else she could max out." SPONSORED BY

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