Diane Davis

Monday, 22 July 2002 09:57

Fraud factors

Health care is a trillion dollar industry in the United States. Unfortunately, health care fraud is nearly a $100 billion dollar industry.

It is a cancer that affects everyone: Taxpayers must pay more to support Medicare and Medicaid; consumers must pay higher premiums or deductibles for health insurance; and companies must shell out more to provide coverage for employees.

For years, good old-fashioned investigative work has been used to ferret out such fraud. But this approach is useful only after a crime has been committed. As is the case with health care itself, prevention is a much-preferred approach. Fortunately, technology has advanced to the point that there are new solutions that can — and should — be used to combat fraud.

To understand how this technology can help, it is important to understand the beast that is health care fraud. It comes in many forms. Claims can be submitted for services that were never rendered or for more serious procedures than were actually performed. Or bills for a group of procedures typically reimbursed as one can be submitted separately.

Then there are kickback schemes, which involve hidden financial arrangements between health care providers and/or patients. In one documented case, underprivileged children were coerced into visiting a clinic, where they were checked by every doctor for every conceivable malady. After their “checkups,” the kids were dropped off back in their neighborhood and given $20 apiece for their time. The doctors received hundreds of thousands of dollars in reimbursements.

How can technology help? The main way is through the use of “decision support solutions,” a group of technologies that use complex databases, mathematical algorithms and often artificial intelligence to transform raw data into more usable information. Tremendous amounts of data are generated in health care. Unfortunately, most of it is fragmented among numerous information systems. By integrating these pieces of the puzzle, a comprehensive view of a provider’s billing practices can be generated. By using advanced decision support tools, patterns of care can be analyzed and payments that shouldn’t be made can be identified.

Analyzing combined data will quickly expose providers who have billed for more hours than it is possible to work in a day and identify providers whose billings are always just under the allowable threshold. All kinds of irregularities can be unearthed.

This technology is already having a dramatic impact in Texas. The state recently implemented a Medicaid fraud and abuse detection system that incorporates advanced decision support capabilities — including neural network technology or learning technologies. The result so far: the system’s hit rate is nearly 100 percent, which means that virtually every suspect flagged indeed was engaging in fraudulent activities. By the year 2000, the system is expected to uncover at least 2,000 additional fraud suspects and recover $14 million more annually.

The Medicare program has begun to take a similar approach. The Health Care Financing Administration, which oversees both the Medicare and Medicaid programs, is implementing an information system that will integrate data from the Medicare Part A and Part B programs (physician and hospital billing, respectively) as well as from its managed care programs. Once all this information is integrated, decision support tools can be used to identify aberrant patterns.

The ultimate goal is to get a consolidated view of a provider’s activity. This is complicated when the provider offers services to numerous state and federal programs, plus employer-funded insurance programs — each with its own designation for that individual. With the help of the National Provider Identifier, which was mandated under the Health Insurance Portability and Accountability Act of 1996, obtaining that consolidated view is closer to reality. When fully implemented, this unique identifier will be used to create an integrated database with records of all providers and suppliers who are certified to bill Medicare or Medicaid.

With this identifier, it will be possible to spot providers who have been excluded from one program or another. Then, before a claim is paid, the database can be checked for evidence of previous fraudulent practices. This will provide a Better Business Bureau of sorts for the health care industry — something that is badly needed.

Diane C. Davis is Fraud and Abuse Systems and Products Manager with EDS’ State Health Care unit in Texas.

Tuesday, 01 November 2005 08:58

Who is an adult student these days?

What image do you have of a college student? Do you envision an 18-year-old who goes to college full-time and lives on campus?

In today’s world, the 18- to 23-year-old residential full-time college student does not completely reflect reality. As the U.S. economy becomes more information-driven, more adults ages 25 and up are finding that a college degree is becoming an increasingly necessary credential in the marketplace for upward mobility or career change.

The need to demonstrate a capacity for lifelong learning to employers is changing the picture of the undergraduate student on campuses across America.

Adult students fit into a category referred to as nontraditional among education professionals. The Council for Adult and Experiential Learning (CAEL) and the National Center for Education statistics (NCES ) have identified seven characteristics that typically define nontraditional adult students.

  • They have delayed enrollment into postsecondary education

  • They attend part-time

  • They are financially independent of parents

  • They work full-time while enrolled

  • They have dependents other than a spouse

  • They are single parents

  • They lack a standard high school diploma

According to NCES, more than 60 percent of the students pursuing higher education degrees are nontraditional when held against these criteria. Statistics show that students 25 years and older make up about 43 percent of the enrollment at institutions of higher learning across the country.

If you fit this definition, what characteristics should you look for in an institution of higher learning?

CAEL collaborated with the American Productivity & Quality Center (APQC) to conduct a study of six colleges and universities focused on serving the adult learner. They developed a set of principles of effectiveness for serving adult learners, which describe processes and approaches that should be adopted by colleges seeking to improve access to and the quality of education for adult students.

These principles include:

  • Outreach. Overcoming barriers of time, place and tradition to create access.

  • Life and career planning. Assistance with assessing and aligning student life and career goals before or at the onset of enrollment to help learners reach their goals.

  • Financing. An available array of payment options that give a student flexibility.

  • Assessment of learning outcomes. Knowledge, skills and competencies acquired from curriculum and life/work experience are assessed to assign academic credit.

  • Teaching-learning processes. Faculty uses multiple methods of instruction to connect concepts to knowledge and skills.

  • Student support systems. Comprehensive academic and student support services are available.

  • Technology. Information technology is used to enhance instruction and convey timely information.

  • Strategic partnerships. Partnerships with employers and other organizations are in place to develop and improve learning opportunities.

It is important for adult students to use these principles as they select a place to begin or continue their undergraduate education. As you consider your goals, schedule and learning style as well as the skills, knowledge and competencies that you want to acquire, take the time to investigate your options among institutions of higher learning.

Remember, it is never too late to start, and you are not alone. Between 1985 and 1996, there was a 65 percent increase in the number of students 35 and older who enrolled in college (Source: NCES).

For more information about these principles, visit www.cael.org, http://www.cael.org/publications_research_whitepapers.htm

Maggie Davis, M.Ed, is the director of the Career and Experiential Education Center at the College of Mount St. Joseph, where she oversees career development, cooperative education, service learning and credit for experiential learning programs. Reach Davis at (513) 244-4824 or Maggie_davis@mail.msj.edu.

Thursday, 19 August 2004 20:00

Expanding overseas

Governments and tax authorities around the world are responding to globalization, economic uncertainty and the connected economy by imposing tighter trading rules and pursuing tax revenue with ever more determination.

For a U.S. company looking to expand overseas, major tax issues need to be addressed prior to actual expansion. These issues relate to structuring, repatriation of profits, transfers of intangible property and transfer pricing.

Structuring the foreign operation
There are different legal forms for conducting business abroad. Most have advantages and disadvantages that should be dealt with in each particular situation.

The legal form adopted will depend on many circumstances involving U.S. and foreign country issues, such as the type of business the company is planning to conduct as well as the income expected. In broad terms, the options for setting up a foreign operation, along with the advantage and disadvantage of each, are summarized on the chart at right.

Repatriation of profits
This issue has to be thoroughly studied for each particular case. Often, advice for this is provided by a consultant who addresses the U.S. side of the situation but pays little attention to the disadvantages or opportunities that a certain strategy can bring in the host country.

It is always necessary to be aware of all the tax treaties that the United States has entered into in order to avoid double taxation. However, there might be opportunities to minimize or defer the taxes paid by the U.S. parent company.

Though there are a number of strategies with a high degree of complexity, as long as the subsidiary does not distribute the earnings (with certain exceptions), the income will not be taxable in the United States.

Intellectual property and intangible assets
To avoid paying U.S. taxes until profits are repatriated and to create enough protection for the company's intangible assets, the following structure is widely used.

  • When a U.S. parent company files a patent with the U.S. Patent and Trademark Office, it is advisable that the filing take place under the Patent Corporate Treaty, in which all the listed countries, including the United States, are designated.
  • Then the U.S. parent company sets up an offshore holding company located in a low-tax jurisdiction.
  • This offshore unit buys a stake in the parent's existing patent before it starts to generate any value. This patent is developed jointly by the parent company and the offshore company under a cost-sharing arrangement.
  • The offshore company licenses the patent to another foreign subsidiary, which collects royalties from all foreign subsidiaries that sell the parent company's products to foreign customers.
  • Finally, a portion of these royalties is paid to the U.S. parent and is subject to U.S. tax. The balance is left in the low-tax offshore company and is not subject to current U.S. taxation.

Transfer pricing issues
In general, whenever there is a transfer of goods or services between related foreign parties, the taxing jurisdictions involved want to ensure that the price set is an "arms-length" price. To substantiate the price as arms-length, companies are required to prepare transfer pricing studies that follow the local regulations.

In this regard, it is important to note that a U.S. transfer pricing study, while valid for U.S. tax purposes, is not binding in the foreign jurisdiction. Therefore, it is important to coordinate these studies.

Multinational businesses are increasingly affected by tax, legislative and regulatory developments throughout the world. Understanding the impact of these developments on business operations and transactions between countries is vital for a company's survival.

LONNIE E. DAVIS, CPA, is director of tax advisory services, CBIZ Accounting, Tax & Advisory Services, Philadelphia/Plymouth Meeting. CBIZ, a publicly traded company and the 10th largest accounting firm nationally (Accounting Today), provides a wide range of assurance, tax and consulting services to small and mid-sized companies. Reach him at (610) 862-2200 or ldavis@cbiz.com.