Fraud, Waste, Abuse, and Investigative Auditing
What to know
Fraud is intentional deception for gain; waste is misuse of resources without intent; abuse is improper practice inconsistent with sound fiscal/medical/business practice, without intent. Auditors must recognize red flags (upcoding patterns, phantom billing, unbundling, services not rendered, identity theft, stark/anti-kickback arrangements). Investigative auditing differs from routine audit: it requires chain of custody, confidentiality, legal coordination, and careful documentation. Know the FCA (including qui tam), the role of the OIG and DOJ, and the importance of not tipping off subjects. Understand that auditors gather evidence; legal counsel directs investigations.
Traps
Questions blur waste (no intent) with fraud (intent)-the distinction affects remedies. Another trap: auditors conducting interviews or confrontations without legal coordination. Watch for mishandling evidence (breaking chain of custody). Also, remember that a pattern is not proof of intent-investigators must build the case.
Rule of thumb
Preserve, don't confront. Document, secure, and escalate to legal before acting.
Worked example
Analytics show one provider billing the same procedure on the same patient on the same day repeatedly. The auditor does not confront the provider; instead, they preserve records, maintain chain of custody, notify legal/compliance, and document the pattern-leaving intent determination to investigators.