🔒Law firm Halloran Sage uses data analytics to detect healthcare cost fraud and abuse

The annual cost of healthcare fraud in the United States is staggering and affects all segments of the economy, from hospitals and insurers to consumers and businesses.

In fact, patient overbilling and other health-related fraud costs the nation anywhere from $70 billion to $234 billion annually, according to 2017 data published by the National Conference of State Legislatures, which leads to higher healthcare costs for individuals and businesses.

Insurers, the government and others employ various tactics to stamp out fraud, and a Hartford-based law firm has found a unique niche serving those efforts.

Halloran Sage has developed a healthcare cost containment practice group that helps detect fraud on behalf of its clients, including insurance companies.

The group includes a data scientist consultant who uses regression analysis and other statistical methods to identify anomalous behavior within billing practices that could signal potential overpayments.

The practice is led by attorney Howard Pierce, a former federal agent and government healthcare official, who Halloran Sage poached about a year ago from a smaller West Hartford law firm.

Pierce and his team — prior to joining Halloran Sage — said they recovered more than $4.4 million on behalf of the U.S. government and $245 million for insurers arising from abuse in the system. Over the past year, they’ve played a role in detecting overbilling related to COVID-19 testing, an issue that has gotten national attention.

Halloran Sage, which has 80 attorneys across seven offices, is hoping the specialty niche will pay off for its healthcare clients and potentially win it more business in the future.

“They offer a unique practice,” said Halloran Sage Managing Partner Jeffrey Gostyla. “Their addition to this firm has broadened and strengthened our litigation and healthcare practice groups.”

Data detection

Pierce had previously been a federal agent for 16 years, where part of his job was to investigate healthcare fraud. He worked for the U.S. Department of Health and Human Services and Treasury Department. Most recently, Pierce plied his trade with a few other associates at a small firm called Pierce LLC.

He said he joined Halloran Sage’s Hartford office in April 2021, to be part of a larger firm that could provide “good hard-nosed litigation support in the courtroom, if needed.”

He brought with him eight clients and said those who cheat the system are sophisticated.

“In cases of fraud, there are providers who want to excessively bill, and they know what controls payers have on those claims,” Pierce said. “So, they engineer around the controls; they reverse engineer to game the system. We then re-engineer their scheme back through regression analysis.”

Pierce said regression analysis with statistical analytics is a major focus of his practice group and allows the firm to compare provider data, identify patterns within billing practices and catch possible fraud.

Key to that effort is Daniel Sandoval, a California-based Ph.D. data scientist who Pierce said he has worked with for decades as a consultant.

Sandoval has developed proprietary algorithms using statistical analytics that incorporate insurance claims data and other publicly available information.

During the last few years, Halloran Sage, on behalf of several regional healthcare payers, has looked into overbilling related to COVID-19 lab testing and found that the greatest amount of fraud is being perpetrated by urgent care centers.

The firm’s claims data analysis found several patterns of abuse, including upcoding, double billing, adding evaluation and management charges when a patient only presents for COVID exposure, and billing for additional and more complex tests than necessary.

Halloran Sage’s cost containment group is currently working on 11 cases in the negotiation process, Pierce said. He declined to provide further details on the investigations.

“There are millions of dollars at stake here,” Pierce said.

Avoiding litigation

The focus of Halloran Sage’s five-member cost containment practice group — including three attorneys, a paralegal and Sandoval — is to avoid litigation and settle cases outside of court. Pierce said in his 31 years in the business, only nine cases have become lawsuits and they were all settled prior to trial.

“We develop our cases in pre-litigation without the benefit of discovery and then we approach the provider to engage in a business-to-business process to resolve these issues without a lawsuit,” Pierce said. “Litigation is great for developing facts, but not good for developing long-term relationships.”

Providers will often settle when faced with an abundance of facts they can’t counter, Pierce said. And in many cases Pierce said his clients often want to maintain a relationship with a provider who tried to overbill, so settlements are typically confidential.

Pierce also uses a private investigator to help with any investigations.

Springfield, Massachusetts insurer Health New England is one of Halloran Sage’s clients.

Richard Swift, the company’s president and CEO, said he has known Pierce for many years and just established a relationship with Halloran Sage in 2021.

Swift said using Pierce’s services has given his company an edge in uncovering fraud.

“Other than some of the most blatant cases of fraud, they can be difficult to detect,” Swift said. “Rather than focusing on the written record, Halloran uses a statistical approach to analyze claims searching for outlier patterns. These outliers then become the basis for them to investigate, digging into the details and looking at the totality of activities that the provider is billing for.”