Star Health and Allied Insurance say its anti-fraud mechanism — medical experience embedded with technology — has helped the standalone health insurer achieve some savings in its claims outgo while taking action against errant hospitals that claimed fake bills.

“We have moved from a manual process of claims to a digital technology-enabled system,” Dr S Prakash, Managing Director, Star Health told businessline. “With our experience in the medical field, we have developed a very robust rule engine for claims. Multiple checks have been put in place to identify irregularities,” he said. While Star Health recognise good hospitals, it has also taken action against “errant hospitals” for malpractices and serious frauds,” he said.

In FY22, the company blacklisted about 1,185 hospitals for fake claims and suspended the cashless option for about 230 hospitals. In FY23, it blacklisted more than 1,300 hospitals, while suspending the cashless mechanism for 300-odd hospitals.

The reasons for blacklisting and suspension of cashless include impersonation, fake claims, phantom billing, duplication, resubmission of rejected claims by others, claims under different names, poor infrastructure, bad clinical governance, etc.

“These fake claims are being raised for the insured people, imagine what will happen to those poor or uninsured people who go to these hospitals. Because of few black sheep, there is a large stress in the industry,” he said.

Key factors

Star health’s achievements in fraud detection and mitigation are attributed to its huge strength of medical professionals in addition to the adoption of technology. It has hired more than 400 medical professionals, the only insurer in this business to do so, who assess the genuine nature of lodged claims. “If we can generate underwriting profit, this fraud detection and mitigation mechanism is one of the key factors,” he said.

According to industry estimates, 10-12 per cent of claims could be in some form of fraud. “This is very important when the industry is struggling to do 2-3 per cent profit,” said Prakash.

While the reduction in claims as a result of fraud deduction will provide financial benefits (there was a 1.2% incremental benefit in terms of lower claims ratio in Q3 of FY23 when compared with Q3 of FY22), the actions we take against errant hospitals may lead to other hospitals changing and transforming, thereby benefiting the entire healthcare ecosystem. Ultimately, the general public should benefit from health coverage, he asserted.

Of course, hospitals can approach the Appellate Committee in General Insurance Council for their grievances.

Prakash asserted that Star Heath always applauded hospitals with good clinical governance and history. “For those hospitals, we have given whatever price they demanded,” he added. It is nudging its customers to go to network hospitals, which are less prone to fraud and consequently pose a lower risk of deductibles on claims

Preventing commercialisation

He also felt there should be a regulatory mechanism to prevent commercialisation. “Most of the hospitals tend to admit the patients into ICU more without proper investigation. This is not fraud, but commercialisation. While fraud has to be mitigated, commercialisation has to be regulated,” he felt.

About 80 per cent of the amount that Star Health settled in claims in FY23 was cashless, while about 68 per cent of approvals by volumes were cashless.

The Chennai-headquartered company commands a leadership position in the retail health business with a market share of 33.4 per cent and has the largest agency footprint with more than 6 lakh agents.

During the 9-month period of this fiscal, the company reported a gross written premium of ₹8,753 crore when compared with ₹7,774 crore in the year-ago period, while its profit after tax stood at ₹517 crore as against a loss of ₹959 crore.

Star Health’s scrip grew 1.69 per cent to end at ₹527.25 apiece on BSE