Hunting Workers’ Comp Fraudsters With Data Analytics

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Hunting Workers’ Comp Fraudsters With Data Analytics

Eric Scheffey, MD was a major player in the Texas workers’ comp system through the early 2000s, treating hundreds of patients and raking in millions of dollars annually. In fact, he was the highest billing provider in the state for years. He lived in a $6 million mansion, owned a private jet, and was a hit on the social scene. However, the lavish lifestyle he built off of Texas employers’ premiums and injured workers’ suffering was found to be ill-gotten: several of his patients died – some on the operating table – after getting surgeries later deemed to be unnecessary (and performed while Scheffey was under the influence of cocaine)¹.  Many other patients were left in chronic pain or incapacitated. In 2005, Scheffey’s license was revoked. The Medical Board Order includes details outlining what amounts to a widespread fraud scheme, in addition to his stunning lack of patient care². Could this have been prevented if investigators had access to big data analytics? 


Workers’ compensation is mandatory in almost every state in the country. It exists to protect employees from financial ruin and bad health if they get in a workplace accident. It also protects employers from lawsuits by employees who sustained compensable injuries on the job. Workers’ comp insurance is big business: in 2013, over $63 billion was spent on compensation and medical bills for injured workers in the United States³. On average, 4% of employees in the workforce are injured in any given year4. In addition to employers and employees, a third party – healthcare providers – is an integral part of the workers’ comp system. However, not surprisingly, there are some bad apples in the bunch of providers who commit fraud, waste and abuse.


Fraud in workers’ comp is similar to other types of healthcare fraud in the types of schemes perpetrated.  We see constantly evolving variations of the same up-coding, unbundling, kickback, overutilization, medical necessity and services not rendered schemes seen in other healthcare systems.   In fact, many providers in the workers’ comp system also provide care to Medicaid and Medicare patients. 


However, there are some marked differences. Because workers’ comp providers typically care for patients who have sustained acute injuries or suffer from occupational illness, the type of services rendered can be very different from those rendered in a private medical health plan or public assistance program. Workers’ comp insurance carriers have provider networks full of orthopedic surgeons, chiropractors, physical therapists, pain management physicians, and include specialized programs like chronic pain management and work hardening programs. Well-known problem areas in Medicare like community mental health centers and hospices are not generally seen in workers’ comp. Because claimants’ lawyers are a significant factor in the workers’ comp system, we sometimes see collusion between providers and attorneys.


The rules and regulations present in the workers’ comp system also differentiate these provider fraud investigations from those in other payer systems. In workers’ comp, each state has its own oversight body that sets rules and regulations, and the required paperwork and the manner in which a claim is administered is different. There are strict rules around a patient’s diagnostic services, treatment, evaluations, and status updates. There are regulations regarding the designation of treating doctors, and the services of Designated Doctors. It’s an intricate system whose complexities can make it difficult to root out fraud, waste and abuse.


However, there are some common red flags we see in workers’ comp medical bills that can be explored using data analytics. Here are a few things an investigator might search for:

  • Chronic pain management or work conditioning/hardening programs which consistently bill 8 hours per patient, per day;
  • Chronic pain management programs which enroll patients with a recent date of injury;
  • Diagnostic companies which consistently bill 4-hour Functional Capacity Evaluations;
  • Pain management doctors who consistently implant spinal cord stimulators and intrathecal pumps in patients with generalized low back pain;
  • Clinicians who overprescribe addictive medications or operate “pill mills;”
  • Physicians who bill more complex laboratory testing services than their equipment allows;
  • Chiropractors who bill excessive units of muscle testing and range of motion testing;
  • Chiropractors who “tack on” passive treatment modalities to patients’ bills;
  • Physical therapists who bill one-on-one treatment when they provided services in a group setting;
  • Orthopedic surgeons who unbundle services that should have been included in the surgical procedure reimbursement.


These are just a handful of measures where data analysis can provide big returns. Looking across the program at measures such as these, one can identify which providers are flagrantly violating rules, or which providers simply look different from their peers. 


The hope is that we can eliminate fraudulent providers like Eric Scheffey from the system. By rooting out those who do not follow rules or treat patients appropriately in the workers’ comp system, we can retain and reward good providers, keep employers’ premiums lower, and give injured workers the care they are due. 


  1. S.C.Gwynne. Dr. Evil. Web. September 2005:
  2. Texas Medical Board. License Verification. Web. December 7, 2015:
  3. National Academy of Social Insurance Report. Workers’ Compensation: Benefits, Coverage, and Costs, 2013. Web. August 2015:
  4. Texas Division of Workers’ Compensation. Biennial Report to the 84th Legislature. Web. December 2014: