The cost of fraud - Business Works
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The cost of fraud

by Professor Mark Button, Director of Centre for Counter Fraud, Portsmouth University There are opportunities for fraud in many areas like procurement, payroll and expenses that often lie undetected in an organisation says Professor Mark Button, Director of the University of Portsmouth The Centre for Counter Fraud. When accurate measurement is undertaken, it is revealed that the losses from fraud and erros often amount to 5% to 7% - a significant impact on the bottom line.

As a result, the world could be losing some £313 billion to fraud and error annually just in the healthcare sector according to our new report. As an example, in the UK this could equate to over £5 billion lost just to the NHS annually through fraud.

The Financial Cost of Healthcare Fraud 2014 is a joint study in partnership with BDO LLP. It is based upon the most accurate measures of fraud conducted on healthcare expenditure from six countries in a variety of different types of expenditure.

The findings show that, since 2008, global average losses within the healthcare sector have risen 25% to 6.99%. When taken as a proportion of the global healthcare expenditure of £4.48 trillion, this equates to £313 billion lost in a year. This is equivalent to more than three times the UK NHS budget for 2011-12.

Healthcare fraud includes a range of activities from patients claiming free prescriptions to which they are not entitled, medical staff claiming for shifts they did not work, to larger-scale operations such as dentists claiming money for NHS treatment they didn't carry out.

fraud increases during a recession when people are under greater financial pressure

Our report demonstrates the problem is massive and on the increase. The findings in this latest report might reflect that fraud increases during a recession when people are under greater financial pressure. Also the fact that, in England, the NHS is changing and working with a greater number of private contractors with a responsibility to turn a profit, where there might be a greater risk of fraud.

By highlighting the problem and countering fraud effectively, the NHS would reduce losses and free up massive resources for better patient care. Healthcare organisations need to prioritise the problem and invest money in the right areas.

Previous studies of counter fraud exercises have shown that it is possible to reduce the losses significantly with a reduction of 40% within 12 months being considered a very reasonable expectation. This would see global healthcare resources increased by as much as £125bn.

Jim Gee, Director of Counter Fraud Services at BDO LLP and Chair of the CCFS Advisory Board said, "The global financial crisis has had a significant impact on governments, corporates and individuals ability to meet the rising cost of their healthcare requirements. These budgetary constraints could, however, be vastly improved with a concerted effort to measure, manage and minimise the cost of fraud and error within the relevant organisations, particularly if this was supported by legislative requirement."

"Our conservative estimate is that, by tackling this problem seriously, healthcare organisations could free up US$195bn which is currently lost. This would make a material difference to the lives of millions of people around the world."

In his foreword to the report, Dr David Evans, Director of Health Systems Financing for the World Health Organisation (WHO) described the report's conclusions as 'convincing', while Dr Simon Peck, a Founder of the Health Insurance Counter Fraud Group (HICFG), a UK industry group of 29 leading healthcare insurance companies, writes in his preface that those 'who have the power to make a difference' should read the report.

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