FICO and Emdeon to Jointly Attack $200 Billion Problem of Health Insurance Fraud, Waste and Abuse

FICO (NYSE:FICO), the leading provider of analytics and decision management technology, and Emdeon Inc (NYSE:EM), a leading provider of healthcare revenue and payment cycle management solutions, announced a commercial agreement aimed at preventing fraud, waste and abuse in the health insurance system. Under the alliance, Emdeon will incorporate FICO™ Insurance Fraud Manager into its leading healthcare revenue and payment cycle transaction processing network in order to offer an enhanced fraud prevention solution to the 1,200 payers currently using Emdeon. Emdeon operates the single largest financial and administrative information exchange in the U.S. healthcare system. The parties believe the combination of Emdeon's healthcare data and central position in the healthcare workflow, complemented by FICO's sophisticated analytics, will result in a unique solution to the marketplace (see also FICO).

Industry estimates place the cost of healthcare fraud, waste and abuse at $200 to $600 billion annually - costs that are ultimately borne by health insurance payers and consumers. FICO and Emdeon identified millions of dollars in cost saving opportunities when they examined claims with indications of fraud, waste or abuse during a pilot study performed with de-identified data from just two U.S. states.

"Creating an efficient healthcare system helps all stakeholders: payers, providers and consumers, and that is why it is one of Emdeon's top priorities," said George Lazenby, chief executive officer of Emdeon. "By putting FICO's advanced, predictive fraud analytics into the hands of payers who pay the nation's healthcare claims, we are helping our customers address one of the largest, most debilitating sources of friction in the healthcare system and ultimately creating change that will lead to efficiency."

Losses due to fraud, waste and abuse are estimated to run 2-10 percent or more of the $2 trillion spent on healthcare today. At the high end of this range, that would translate to an estimated $10 per $100 of healthcare dollars spent on fraud. When compared to the 7 cents per $100 spent on fraud in the credit card industry, where FICO's fraud management solution is the industry standard, healthcare fraud is more than one hundred times the approximate rate of fraud-related losses in the credit-card industry.

"As Congress and the American people grapple with the magnitude of the landmark Healthcare Bill, our work with Emdeon is focused on a very practical matter: reducing the costs borne by healthcare payers and taxpayers," said Mark Greene, chief executive officer at FICO. "FICO fraud management technology has made an enormous impact on the credit card industry since its introduction in 1992, cutting losses by an estimated $10 billion over that period of time. Together with Emdeon, we intend to make a similar contribution in healthcare."

According to Maureen O'Neil, principal research analyst for insurance, Gartner, "Accurately detecting fraud, waste and abuse ahead of payment remains largely elusive for most health insurers. Healthcare reform will require a paradigm shift for fraud, waste and abuse detection that will require health insurers to evolve to a pre-pay, pre-adjudication review. This will demand new IT capabilities, an enhanced role for risk management and a profound cultural change among health insurers."