Do e-Medical Records Invite Fraud?

The Obama administration is in the middle of a $17 billion push to convert the nation’s system of paper medical records to digital by the year 2014. But some security experts say the rush to get the system in place could make it vulnerable to fraud.

CNNMoney.com reports extensively on the current problem, which costs the U.S. health care system as much as $100 billion a year.

In 2008, scammers and thieves swiped more than $19,000 per incident of health care fraud, four times the amount from overall identity theft, according to information from Javelin Strategy & Research of San Francisco cited in the article. The cost to the individual victim was estimated at nearly $1,200 – more than double that of what Javelin associates with identity theft in general.

The most common medical fraud rip-offs involve someone who legitimately works in health care – such as a hospital administrator or doctor’s assistant – pilfering patient information and selling it to an outside group. Javelin President James Van Dyke says Social Security numbers and insurance information is often stolen so thieves can bill insurance providers for drugs, equipment or treatment that never was provided.

Patients also run a risk that their medical records will be tampered with or mixed up with someone else’s, exposing them to potential danger. On a lesser but also troubling level, patients can get stuck with bills for services they never asked for or received.

The Medicare system is a much more vulnerable target than private insurers because it serves such a vast number of people, Rob Montemorra, head of the FBI’s Health Care Fraud Unit, tells CNNMoney.com. Another reason he says Medicare information is a “goldmine” for thieves is that, by law, Medicare must send out payments to health care providers within a relatively short time.

Kaiser Permanente, the managed-care giant based in Oakland, Calif., has switched all of its clinics and the vast majority of its hospitals to paperless records, BusinessWeek reported last year. It’s the culmination of a decades-long, multibillion-dollar effort.

Nevertheless, Kaiser officials said Tuesday that medical records for about 15,500 Northern California patients were compromised when an external hard drive was stolen from an employee’s car, The San Francisco Chronicle reported. The drive contained patient names, medical record numbers and possibly ages, genders, phone numbers and addresses, but not Social Security numbers or any financial data, officials said.