The forced departure of nearly one-tenth of the work force at a Toronto geriatric hospital has put the spotlight on the growing problem of fraudulent employee benefits claims.
Baycrest Health Sciences, a geriatric hospital in the city’s North York area, confirmed Thursday that about 150 of its employees recently quit or had been dismissed for filing millions of dollars in bogus benefit claims.
"We are extremely disappointed by these findings as we view any misuse of our benefits plan as inconsistent with our policies and procedures and incompatible with our Baycrest values," the hospital said in a statement.
The statement didn’t provide details about the problem, but in response to follow-up questions, Baycrest confirmed that the loss from benefits misuse ranged between $4-million and $5-million over a period of eight years.
In addition, “the costs to do the investigation [and] ensure adequate staffing, the process involved in rooting this from our organization, is greater and we are still calculating that amount,” hospital spokeswoman Michelle Petch Gotuzzo said.
The loss of 150 employees represents more than 8 per cent of the hospital’s 1,800 staff.
“This is a large case, there’s no question about it. Definitely one of the larger ones [but] it’s something that’s occurring across the country at various levels,” said Gary Askin, assistant vice-president, fraud risk management, at Sun Life Financial, an insurance firm that is not involved in the Baycrest case but has dealt with similar issues.
Mr. Askin said that about $34-billion are paid each year in health and dental claims in Canada. “Even a small percentage of that [if bogus] would represent a lot of money.”
Baycrest discovered its problem during an audit launched last year after it joined a number of other Ontario hospitals in an effort to set up an approved provider network (APN), a system of vetted benefit vendors that would have cut down on fraudulent claims.
Gordon Burke, president of Orion Audit Ltd., the external firm that reviewed the Baycrest staffers’ benefit claims, would not speak specifically about the case but described the labour-intensive process involved in such inspections.
He said Orion would go over all the claims, looking for unusual patterns – for example, if a number of plan members, along with their spouse and all their dependent children, had maxed out on claims for items such as compression socks, braces and orthotics.
“And then we see another employee doing the same thing. And then another employee ... we’ll think, okay, they’re probably talking to each other and they probably have found some provider out there that is complicit,” Mr. Burke said.
Orion would then send a team of auditors to the insurance company or plan administrator, pull out the hard copy for each claim and interview the employees, he said.
Detective Sergeant John Whitworth, a Toronto Police Services investigator, said Baycrest had been in contact with him but hasn’t asked his department to step in. In an e-mail to The Globe and Mail, he said Toronto police remains available “if we were to be contacted by them at any point in the future.”
Mr. Askin, a former Waterloo, Ont., police commander, said his firm has 100 staffers investigating claims, in addition to data scientists. “We could use even more.”
The insurance industry has tried to deal with the problem by aggressively delisting – refusing to process claims from fraudulent providers – and advocating for non-criminal solutions such as regulatory fines, Mr. Askin said.
Another approach is setting up an APN, making it mandatory for employees to deal with approved providers, Mr. Burke. He said he had been helping a number of hospitals have an APN in place by the fall, a sign that the industry is trying to tackle the growing fraud problem.
The Ontario Ministry of Health provides funding to hospitals for their operations but the health centres decide how they allocate that money. Baycrest confirmed that 75 per cent of its benefits plan was financed by public funds.
“From what we currently know, it’s clear that long-standing auditing weaknesses allowed this sort of brazen abuse to go unchecked for too long," said Travis Kann, a spokesman for provincial Health Minister Christine Elliott.
He added that the minister will be in contact with Baycrest and the Ontario Hospital Association to talk about the problem.
Our Morning Update and Evening Update newsletters are written by Globe editors, giving you a concise summary of the day’s most important headlines. Sign up today.