FWA Insights: Stopping “phantom providers” with prepay intervention
One of the most elusive fraud, waste, and abuse (FWA) schemes facing health plans today is the rise of “phantom providers.” These are entities that exist only long enough to submit fraudulent claims and disappear before detection. Phantom providers, also known as ghost networks, are often calculated, fast-moving, and sometimes international in scope. And as the experience of Cotiviti’s own special investigations unit (SIU) demonstrates, the most effective way to catch them is with prepay intervention.
The anatomy of a phantom provider scheme
Phantom providers typically exploit dormant or newly created National Provider Identifiers (NPIs). Sometimes several thousand new NPIs are created each week, providing ample opportunity. These bad actors begin by testing the waters with a few low-dollar claims. If those go unnoticed, they escalate to submitting a flood of fraudulent claims over a short period, often just weeks. By the time postpay audits catch up, the perpetrators are long gone.
These schemes are often backed by member ID theft, the backbone of their operation. In recent cases, Cotiviti’s SIU flagged hundreds of suspect NPIs based on shared addresses, naming conventions, and other anomalies. While not always sophisticated, these actors are adept at bypassing traditional claims systems.
Why postpay is too late
Once a phantom provider has been paid, recovery becomes nearly impossible. These entities are often tied to organized criminal networks or operate from outside the U.S., making enforcement and recoupment unfeasible. That’s why prepay detection is critical. It’s the only window of opportunity to stop payment before it’s too late.
Key indicators include:
- Residential addresses listed as provider practice locations
- Common authorized officials across multiple NPIs
- Naming anomalies, such as acronyms or inconsistent spacing
- Unusual claim volumes from newly registered providers
Often, current postpay tools fail to meet the challenge of addressing these patterns. Prepay tools that flag claims before payment is issued are the only way to combat these providers. The sheer volume of opportunities means health plans must adopt predictive strategies to stay ahead. That means not just relying on automated systems but also having human oversight to conduct a dedicated review of new NPIs to assess legitimacy.
Getting ahead of FWA
In December, CMS is expected to increase scrutiny on provider validation and NPI oversight. While these regulations may not introduce new concepts to the industry, they underscore the importance of getting ahead of fraud, not just reacting to it.
Cotiviti’s SIU continues to work with clients to implement interventions that go beyond standard detection by using AI, expert rules, and human analysis to flag phantom providers before they can exploit the system. Our prospective and retrospective 360 Pattern Review™ solution empowers health plans with automated, machine learning-powered detection of suspect billing behaviors for true FWA prevention and management across the entire claim payment cycle. Read our fact sheet and learn how we identify potential fraud cases earlier with a 360-degree view of provider billing.
