Submitted to the Auto Insurance Anti-Fraud Task Force
Willie Handler and Associates
September 27, 2012
As part of its mandate, the Auto Insurance Anti-Fraud Task Force proposed developing an oversight model for health care and assessment clinics and facilities which would create:
The focus of this report was defined by the Task Force and reflects research of jurisdictions where regulatory approaches to the oversight of health care facilities, assessment centres and other organizations exist. The Task Force was also interested in proposals for the development of standard assessment protocols for assessment centres. This report also reflects discussions with stakeholders on the feasibility of options for the oversight of facilities operating in the auto insurance sector.
There are 21 health regulatory colleges in Ontario with an additional 5 colleges in transition. Many of these regulated health professions work in the auto insurance sector. In addition, social workers and social services workers are also regulated professions that work with auto insurance claimants. Although most professionals are regulated, the facilities in which they work are not. The health regulatory colleges’ mandate typically covers public protection and quality service with little focus on business practices or qualifications of college members that provide third party assessments, two areas of concern within the auto insurance sector.
Health care facilities and clinics treating and assessing auto insurance claimants range from sole practitioners to publicly traded companies, from public hospitals to private offices, from regulated professionals to unlicensed providers. Little is known about these service providers other than the number of facilities that have registered with Health Claims for Auto Insurance (HCAI) and the number of providers working in the facilities.
The assessment industry that the insurance industry depends on for insurer examinations has undergone consolidation and is now dominated by large companies, many based in the U.S. The number of physicians willing to do this type of work is relatively small and as a result assessment companies have sometimes had difficulty recruiting physicians with appropriate experience.
There are a small number of examples of health care facilities that are required to meet additional licensing and regulatory requirements beyond the regulatory requirements of an individual professional’s regulator college.
In Ontario, diagnostic facilities and some ambulatory care facilities are licensed under the Independent Health Facilities Act. Licenses are awarded for up to five years by the Ministry of Health and Long-Term Care (MHLTC) and can be suspended or revoked for poor service or a contravention of legislative or licence conditions. The MHLTC also appoints inspectors to inspect facilities to ensure they comply with all provisions of the legislation and the licence conditions.2
In Ontario, pharmacies are regulated by the Drug and Pharmacies Regulation Act and can only be owned or operated by a pharmacist or a corporation where the majority of the directors of the corporation are pharmacists. Since pharmacies are not multi-disciplinary facilities the Ontario College of Pharmacists regulates both the professionals and their businesses.
In the U.S., the state governments are responsible for licensing both health professions and health care facilities. U.S. regulators are also primarily focused on protecting the public and quality of care. Typically, health care facilities in many states are licensed, regulated, inspected, and/or certified by a number of public and private agencies at the state and federal levels, including the state Departments of Health and the U.S. Department of Health and Human Services’ Centers for Medicare and Medicaid Services. These agencies have separate, yet sometimes overlapping jurisdictions.
Many state governments also operate some form of fraud bureau usually under the auspices of the state Department of Insurance. The state fraud bureaus’ mandate is to detect, investigate and prevent insurance scams. Most fraud bureaus deal with all insurance fraud, but some investigate only certain types, such as workers compensation or auto insurance. The largest type of insurance fraud in the U.S. is health care fraud. The National Health Care Anti-Fraud Association (NHCAA) estimates that the financial losses due to health care fraud are in the tens of billions of dollars each year.3
Florida is the only state where a separate licensing regime has been created for facilities that receive auto insurance (referred to as personal injury protection or PIP) payments. Clinics are licensed by the Agency for Health Care Administration. However, many providers, such as clinics affiliated with medical schools, don't need to be licensed. These requirements were introduced during the most recent legislative session and are effective July 1, 2012.4
Only licensed clinics are allowed to receive PIP reimbursements. Many of the so-called “pain clinics” taking on PIP claims were unlicensed, and law enforcement officials have demonstrated the link between unlicensed providers and staged accidents. Finally, licensed health care practitioner found guilty of fraud relating to PIP services loses his/her license for five years and may not receive reimbursement for PIP services for ten years.
Two Florida counties have gone even further in an effort to oversee the conduct of health care clinics. Hillsborough County passed an ordinance in September 2011 and Miami-Dade County in February 2012 imposing additional licensing requirement on facilities operating in those jurisdictions. Both Hillsborough and Miami-Dade Counties have been experiencing high levels of fraudulent activity including staged accidents. The National Insurance Crime Bureau reports a significant drop in fraud following the introduction of licensing requirements in Hillsborough County.5 It is perhaps still early to know for sure whether the measures are successful and there have been a number of lawsuits following the introduction of the County Ordinance.
It’s worth noting that over the past two years a number of significant anti-fraud reforms have been introduced to the Ontario auto insurance system which have had a significant impact on health care assessment facilities in the province. There is anecdotal evidence that health care and assessment facilities have experienced significant reductions in revenue and some have sold their business or withdrawn from the market.
Fraudulent claims whether the claimant’s “injuries” are real or not involve maximizing revenue for the parties through accident benefit payments. Typically claims or their representatives will apply for weekly income replacement benefits or caregiver benefits, housekeeping benefits and attendant care benefits in addition to thousands of dollars in treatment and assessments.
When the government reduced or eliminated a number of standard coverages on September 1, 2010, it removed opportunities for fraudsters. Specifically, coverage for: medical and rehabilitation expenses have been reduced from $100,000 to $50,000; caregiver expenses and housekeeping expenses are only available to those with catastrophic injuries (about 1% of claimants); and attendant care expenses are no longer paid to claimants with minor injuries. With respect to assessments, there is no longer unlimited coverage. Instead payment for assessment expenses comes out of the $50,000 in coverage for medical and rehabilitation expenses. As well, payment for each individual assessment has been capped at $2,000.
The reform that has likely had the greatest impact on fraudsters has been the introduction of a $3,500 cap on medical and rehabilitation expenses (including assessments) for claimants with minor injuries. A minor injury as defined in the SABS includes most soft tissue injuries which constitutes the majority of injuries sustained in auto accidents. With only $3,500 available for treatment and assessment of most injuries and no access to caregiver benefits, housekeeping benefits and attendant care benefits, the benefit system has become more challenging for organized crime rings. Since the introduction of the minor injury cap, most insurers have been extremely vigilant in ensuring that claims with minor injuries do not avoid the cap to the frustration of fraudsters.
Other regulatory changes have provided insurers with additional tools to challenge questionable claims. The new provision was introduced in the SABS effective on July 1, 2011 provides insurers with the right to inspect and copy original benefit applications including treatment and assessment plans and other documents giving rise to a claim. An insurer can also request a statutory declaration, which is a statement made under oath, regarding the circumstances that gave rise to an invoice. To address the growth of fraudulent clinics in Ontario, the SABS also allows the insurer to request the name and full municipal business address of a provider billing the insurer and proof of the provider’s identity.
The recommendations in this report with respect to the licensing of health care and assessment facilities are intended to build on the 2010 regulatory reforms.
A licensing and regulatory system for health care and assessment facilities should include the following features:
There are a limited number of options when considering an appropriate body to assume regulatory responsibility a new licensing regime. A new regulator could be established but creating a new entity from scratch would be a long-term process and this new regulator would still need to be accountable to an existing government ministry whether it is part of the Ontario public service or the private sector.
Some stakeholders have suggested that the Ministry of Health and Long-Term Care would be a logical choice for overseeing health care and assessment facilities. The insurance industry has recommended that the MHLTC’s Independent Health Facilities Program licence facilities operating appears to be a commonsense approach since the ministry is already licensing facilities under the Independent Health Facilities Act. In addition, a private member’s bill, Bill 41, Reducing Automobile Insurance Premiums by Eliminating Fraud Act, 2012 was introduced in the provincial legislature earlier this year. The bill, if passed, would provide for investigations of regulated health professionals to determine whether a professional has been involved in fraudulent activity in connection with auto insurance claims.
However, Bill 41 in its current form is flawed. It does not fully address the existing regulatory gap and fails to create an oversight regime for all health care and assessment facilities. Instead it proposes only to license regulated health professionals and corporations wholly owned by regulated health professionals. As well I am concerned that the focus of the Independent Heath Facilities Program and their inspectors has been on service quality and not reviewing business practices and investigating fraud.
All things considered FSCO would be a more appropriate body to designate as the regulator for a proposed licensing and regulatory model. Although FSCO already has considerable regulatory responsibilities and is struggling to manage a significant backlog in cases requiring mediation services, it also has a broad experience in this area. It is responsible for overseeing the market conduct of insurance companies, insurance agents, independent adjusters and mortgage brokers. In the past FSCO also had regulatory responsibility for paralegals before oversight was transferred to the Law Society of Upper Canada.
To assist FSCO with its regulatory responsibilities with respect to the licensing of health care and assessment facilities, an advisory body should be established. The advisory body should be comprised of representatives from the health regulatory colleges, insurance industry and health care and assessment facilities and provide FSCO with advice on licensing requirements, business practice standards, licence application processes, disciplinary processes and audit functions.
Stakeholders have suggested that there will need to be more cooperation and coordination between FSCO and the health regulatory colleges. As well, there is agreement that the colleges should play an important role on the proposed advisory body. While it is recommended that FSCO take on responsibility for the business practices of health care and assessment facilities, it is important that the health regulatory colleges continue to be responsible for maintaining the clinical practice standards of the regulated health professionals employed by theses facilities.
Strong lines of communication will be necessary to ensure this split responsibility is effective. For example, the colleges should inform FSCO of changes in the status of their members and any disciplinary action taken. In addition, the colleges should know when a facility that employs one of their members is being investigated by FSCO. College members should also be required to advise their college that they or the facility they work in is being investigated by FSCO during the college license renewal process.
In addition to the development of anti-fraud tools such as the Professional Credential Tracker, Personal Identification Numbers for HCAI users and Business-to-Business Statements, there is a role for HCAI in the regulation of health care and assessment facilities.
Once a licensing regime has been established, HCAI should only register facilities that have been licensed by FSCO and only licensed facilities should be able to bill auto insurers. There will be situations where FSCO may be suspending or revoking a licence. In such cases, FSCO should have the authority to direct HCAI to also suspend or terminate the billing privileges of those facilities.
To complement the Business-to-Business Statements, facilities should be required to attest to the accuracy and appropriateness of bills submitted through HCAI. I recommend that this attestation be carried out on a quarterly basis. A facility that fails to complete the attestation should also be suspended from HCAI.
Finally I would like to see the development of standardized reports that would inform FSCO of unusual billing patterns by facilities. This could become a useful regulatory and risk assessment tool for FSCO.
The HCAI data reveals that there is a wide range of professionals and facilities operating in the auto insurance sector. There are 22 regulated professions working either in sole practices, group practices or multi-disciplinary treatment facilities.
As of May 2012 there were 8,515 health care and assessment facilities registered on HCAI although 1,291 had never submitted a document to the HCAI system. Those HCAI registered facilities had collectively registered with HCAI a total of 29,537 health providers employed at their facility. The breakdown of providers is:
|Transitional regulated professionals||2,638|
A licensing system should cover all health care facilities and clinics whether they are sole practitioners or multi-disciplinary settings. However, a regulated health professional who is an employee of a facility should not require individual licensing. Similarly, all assessment facilities, whether providing plaintiff- or defence-oriented assessments should also be licensed but their assessors should also not require licensing.
One option considered was to exempt sole practitioners from having to obtain a licence. In the end I am concerned that exemptions could create loopholes and some unanticipated outcomes. It is recommended that a sole practitioner treating auto insurance claimants should be subject to similar licensing requirements as a multi-disciplinary facility.
There is also a group of unregulated providers who operate within the auto insurance sector providing a wide range of services including case management, vocational rehabilitation or rehabilitation support. Many of these providers work within facilities which under the proposed model would be licensed. However, there is another group of unregulated providers that work independently or are affiliated with a legal firm. These providers should also fall under the proposed licensing regime.
Finally, there are vendors who provide medical and rehabilitation goods and services that are currently excluded from the HCAI system. They may provide assistive devices, communication aides or vehicle and home modifications. Exceptions have created gaps in data collection and could lead to loopholes to be exploited by fraudsters. It is recommended that these providers be required to register with HCAI and also be licensed.
There was a considerable amount of feedback received regarding assessment facilities operating in the auto insurance system, in particular those conducting insurer examinations. Independent expert evaluations are an important element in Ontario’s auto insurance system as well as disability insurance, the WSIB and the CPP.
During discussions with stakeholders I picked up on a number of recurring themes regarding the assessments provided both to insurers and claimants. There are assessors who are deliberately facilitating a fraudulent claim by falsely establishing causation or impairment and by providing opinions outside their scope of competence or not based on scientific evidence. In some cases, an incompetent assessor may unintentionally be participating in fraud because of poor clinical or business practices. As well, there is a form of “doctor shopping” that occurs by both insurers and the plaintiff bar where clinicians with known beliefs are selected in the expectation of a specific opinion. Some of these issues have been exacerbated by a shortage of qualified assessors.
These behaviours have put the assessment industry in disrepute. I believe that requiring assessment facilities to be licensed by FSCO will have some impact but only as it relates to business practices. However, establishing standards for delivering assessment services and evaluating those services are beyond the fraud mandate of the Task Force and the competencies of FSCO. I strongly urge the health regulatory colleges to become more involved in clinical practice standards of regulated health professionals who conduct third party assessments to ensure that these professionals have the necessary competencies and are working within their scope of practice. I also urge FSCO to assist the colleges in this endeavour by sharing what information they have regarding the assessment industry.
In the interim, I am recommending a number of specific licensing requirements for facilities that conduct insurer examinations. The regulated health professionals that conduct insurer examinations should have a minimum of five years of applicable clinical experience and this should be detailed in the facility’s licence application. The designated regulated professional who is responsible for all the clinical work at a facility should be required to attest that assessors conducting insurer examinations at their facility are working within their scope of practice, have a minimum of five years applicable clinical experience and are providing opinions that are independent and not subject to influence.
The Commission on Accreditation of Rehabilitation Facilities (CARF) has recently developed accreditation standards for independent evaluation services and has begun to accredit facilities that conduct third party examinations. I urge owners of assessment facilities to seek CARF accreditation in order to demonstrate that they truly are independent and providing quality service.
There are 7,362 active facilities (i.e., they have submitted at least one form) registered on HCAI. One of the considerations was to determine how robust of a licensing regime should be developed where there are such a large number of facilities to be licensed. I suggest that a health professional that only submits several invoices in a year should not require the same type of oversight as a facility billing $1 million per month through HCAI. The chart below breaks down HCAI billings by volume for the month of May 2012.
|Number of Facilities||May HCAI Billings||Annualized Billings|
|823||Under $1,000||Under $12,000|
|971||$1,000 to $2,500||$12,000 to $30,000|
|692||$2,500 to $5,000||$30,000 to $60,000|
|568||$5,000 to $10,000||$60,000 to $120,000|
|501||$10,000 to $25,000||$120,000 to $300,000|
|150||$25,000 to $50,000||$300,000 to $600,000|
|77||$50,000 to $100,000||$600,000 to $1,200,000|
|37||$100,000 to $250,000||$1,200,000 to $3,000,000|
|22||$250,000 to $500,000||$3,000,000 to $6,000,000|
|10||$500,000 to $1,000,000||$6,000,000 to $12,000,000|
|2||Over $1,000,000||Over $12,000,000|
The data shows that in May fewer than 7% of facilities registered on HCAI generated approximately 80% of the billing volume. As a result, I am recommending that the proposed licensing system be segmented by billing volume to reflect the risk that a facility imposes on the auto insurance system. A more robust licensing process should apply to the top billers, that is, those with over $200,000 in annual HCAI billings. Based on May 2012 HCAI billings, only 474 facilities would reach $200,000 in annual billings. The remaining facilities should fall under a more simplified licensing process.
Facilities and sole practitioners that have billed more than $200,000 over the past year (based on HCAI data) would be required to apply for a Facility Licence. For those that have been in business for less than a year old, the threshold should be $50,000 or more in HCAI billings over the past three months.
New facilities and professionals would have the option of applying for a Facility Licence or a General Licence. However, should a facility or professional with a General Licence reach one of two billing thresholds, they would need to apply for a Facility Licence.
Applicants for Facility Licences are expected to primarily be multi-disciplinary treatment and assessment facilities. A sole practitioner that would require a Facility Licence should be a rare occurrence.
All unregulated providers (i.e., those that do not fall under the Regulated Health Professions Act or the Social Work and Social Services Work Act) and are not employed by facility with a Facility Licence or General Licence should also be licensed under a proposed Restricted Licence. The Restricted License would not have some of the requirements that come with a Facility Licence or a General Licence but should also come with restriction with respect to the type of goods and services that can be provided to auto insurance claimants. The types of goods and services that should be covered by a Restricted Licence include (but not limited to) providers of case management and vocational rehabilitation services as well as vendors of assistive devices, communication aides and vehicle and home modifications. The number of potential applicants is unknown.
Most sole practitioners (that are regulated health professionals) and facilities that have low billing volumes would apply for a General Licence. Again, the threshold for a General Licence should be less than $200,000 in annual billing through HCAI. The application process for a General Licence should be much simpler than the process for applying for either a Facility Licence or Restricted Licence. The number of potential applicants is expected to be between 5,000 and 7,000.
Both the Facility and Restricted Licences should require a paper application. The applications should set out the information and requirements required for licensing. The General Licence should involve an electronic filing process similar to the registration process under HCAI. As part of the application process, a facility would have to agree to a set of business practice standards developed by FSCO. A failure to meet those standards should lead to suspension or revocation of a licence if deemed serious enough. All applicants that meet the requirements set out in the applications should receive a licence.
An owner of multiple facilities should be required to have a licence for each facility but the aggregate billings of the facilities under the ownership umbrella would determine the type of licence that would be required. This is intended to prevent an owner from breaking up a facility into smaller entities in order to avoid applying for a Facility Licence.
FSCO-issued licence should be non-transferrable and should not be assignable. Any ownership change should require a new application and licence. Licences should be valid for one year and should be renewed by submitting an acceptable Annual Information Return.
|Facilities submits licence application to FSCO|
|FSCO reviews application to ensure facility meets licensing requirements|
|FSCO issues licence to facility|
|Facility uses FSCO-issued licence to register with HCAI|
There was consideration given to whether there should be some restrictions on who can own a licensed facility. The insurance industry has proposed that only regulated health professionals should be owners of licensed facilities. The rationale is that it increases accountability of the owner who would risk not only losing their business licence but also their professional licence.
I believe that such a restriction is impractical and does not reflect current ownership trends in private health care delivery in Ontario. There has been considerable consolidation in the sector by corporate entities including publicly traded companies. Such a restriction would also exclude Ontario public hospitals from owning private rehabilitation and assessment facilities.
Hillsborough County in Florida does not have restrictions on ownership. Instead the County Ordinance requires that each licensed clinic have a designated physician who is accountable for the operation of the facility.6 I agree with this approach but wish to substitute designated physician with a designated regulated professional. The designated regulated professional at each facility should be accountable for the operations of their facility and in doing so will also be placing their professional licence at risk. I also recommend that the designated regulated professional should be onsite at least three days per week.
When a licence is issued to a sole practitioner, the owner and designated health professional must be the same person. As well, applicants for a Restricted Licence will should not be required to appoint a designated health professional but should be required to name a designated contact who will held accountable for the operations.
It is recommended that owners and designated individuals cannot have a felony conviction going back five years. The licence applications should require that a police background check for owners and designated individuals which would accompany the applications.
There was consideration given to requiring that all treatment and assessment facilities be independent of insurance companies, claims adjusting companies, personal injury lawyers and paralegal operating in the auto insurance sector including an outright prohibition on facility ownership. In the end I believe that such ownership restrictions would be contrary to a free market and tend to be introduced to deal with concerns regarding utilization rates as opposed to fraud.
A number of stakeholders commented during consultations that the SABS provisions that existed prior to September 1, 2010 dealing with conflicts of interest should be restored. There needs to be more transparency with respect to clinic ownership including real or potential conflicts of interest. Therefore, I am recommending that the licence applications include a section dealing with conflicts of interest disclosure covering relationships between insurers, adjusting firms, personal injury lawyers and paralegals. As well, facilities that fail to disclose conflicts of interest should be subject to sanctions from FSCO including suspension and revocation of a licence, if warranted.
I reviewed the Hillsborough County application for a PIP provider clinic licence and feel it is a useful guide to identifying the type of information that might be requested of a licence applicant. I also reviewed FSCO’s licence applications for mortgage brokers and mortgage administrators. The list below is not specific to each proposed type of licence. The amount and type of information will vary by licence type.
An application should include the following information regarding the facility:
An application should including the following information regarding the owners:
An application should include the following information regarding the designated regulated professional or designated contact (for Restricted Licence applications) at the facility:
An application should include the following information regarding the professional staff employed by the facility:
An application should include the following attestation signed by the owners and the designated regulated professional or designated contact:
Licences issued by FSCO should be renewed following the filing of an acceptable Annual Information Return (AIR). The AIR would update FSCO on the facility’s business practices. All AIRs should be filed electronically including facilities with a Facility Licence or Restricted Licence. The AIR should also have an attestation regarding the accuracy of the information provided.
A facility that fails to submit an AIR, submits an AIR after the due date or submits an unacceptable AIR should be subject to sanctions including an administrative penalty, licence suspension or revocation of licence.
Facilities licensed by FSCO should be required to maintain a set of standards developed by FSCO. The standards should relate to the operational side of these businesses and not the clinical practice standard of the regulated health professionals employed by the facilities. Regulated health professionals should continue to be accountable to their health regulatory college with respect to clinical practice standards and professional misconduct.
Business practice standards should be a compilation of licensing requirements, regulatory requirements, HCAI terms and conditions and Superintendent guidelines and directives. The following are a number of proposed business practice standards for consideration:
I am recommending that facilities should be sanctioned for fraudulent behaviour or persistent deficient business practices. FSCO should have a range of regulatory tools available to sanction facilities for non-compliance. The tools should include the ability to issue an order to a facility regarding deficient business practices, suspend or revoke a facility’s licence for non-compliance, impose an administrative penalty, charge a facility under the Provincial Offences Act and recommend criminal charge when suspected criminal activity is uncovered.
Examples of non-compliance that should be subject to sanctions include:
Facilities should be able to appeal a Superintendent’s decisions with the Financial Services Tribunal. The Financial Services Tribunal is an independent, adjudicative body composed of nine to 15 members, including the Chair and two Vice-Chairs. The Tribunal has exclusive jurisdiction to exercise the powers conferred under the Financial Services Commission of Ontario Act and other Acts that confer powers on or assign duties to the Tribunal. It also has exclusive jurisdiction to determine all questions of fact or law that arise in any proceeding before it.
For an accessible version of this flowchart, click here.
FSCO has estimated that developing the proposed licensing system would require 30 to 35 staff for a period of 1 to 2 years. These resources would be used for policy and program development, to create the registration and licensing system, to develop a web-based licence application, to set up monitoring and compliance functions and to train and develop enforcement capabilities.
I am recommending that licensing fees be established to help fund the system without creating a financial barrier for facilities and practitioners. Licensing fees should be sufficient to cover the majority of the costs associated with the propose licensing system. But recognizing that the insurance industry will benefit from the new system therefore, the industry should bear some of the costs through their FSCO assessments. The ratio of costs covered by providers and insurers should be determined when there is more information regarding the total cost of establishing a licensing system.
1 Ontario Auto Insurance Anti-Fraud Task Force Steering Committee Update (July 2012), pp. 29-30
2 Independent Health Facilities Act (R.S.O. 1990, c.13)
3 National Health Care Anti-Fraud Association, The Problem of Health Care Fraud, August 2, 2012
4 Florida House Bill 119 – Motor Vehicle Personal Injury Protection Insurance
5 insurancenewsnet.com, Hillsborough County’s Crackdown Leads to 62 Percent Decrease in Staged Accidents, February 9, 2012
6 Ordinance #11-13, Hillsborough County PIP Medical Providers Ordinance