Question

Assume the internal auditor becomes concerned that significant fraud may be taking place by dentists who are billing the health care processor for services that were not provided. For example, employees may have their teeth cleaned, but the dentist charges the processor for pulling teeth and developing dentures. The most effective procedure to determine whether such a fraud exists is to

A. Develop a schedule of payments made to individual dentists. Verify that payments were made to the dentists by confirming the payments with the health care processor.
B. Take a discovery sample of employee claims that were submitted through dentist offices, and confirm the type of service performed by the dentist through direct correspondence with the employee who had the service performed.
C. Take a random sample of payments made to dentists and confirm the amounts paid with the dentists' offices to determine that the amounts agree with the amounts billed by the dentists.
D. Take a random sample of claims submitted by dentists and trace through the system to determine whether the claims were paid at the amounts billed.

Answer 1

To detect fraud in dentist billing practices, take a discovery sample of employee claims and confirm the services received directly with the employees. This approach, known as Option B, directly verifies billed versus received services to uncover any fraudulent activities and is essential for integrity in healthcare finance.

Step-by-step explanation:

The most effective procedure to determine if dentists are committing fraud by billing for services that were not provided is by taking a discovery sample of employee claims and confirming the actual service rendered through direct communication with the employees. In this scenario, for the internal auditor to ascertain the veracity of the claims, the best course of action would be option B. This strategy involves directly matching the billed services with the actual services received by the employees, thereby identifying any discrepancies that point towards fraudulent activities.

Option B is designed to pinpoint specific instances of fraud by verifying with the actual recipients of the dental services whether the services billed for were actually provided. This direct verification bypasses any manipulation that could be present in the documents or communications between the dentists and the health care processor. This approach is more precise than simply verifying payment amounts or tracing claims through the system. Within the broader context of healthcare finance systems, these verification procedures are essential for maintaining the integrity of both fee-for-service and health maintenance organizations (HMOs).