While the financial haemorrhage linked to fraud, waste and abuse in the healthcare sector adds up to billions every year (between R22bn and R28bn), experts say advanced analytics and AI tools are emerging as powerful weapons in identifying irregular patterns and flagging suspect claims for investigation, reports the Sunday Times.
The Health Funders Association (HFA) says fraud, waste and abuse (FWA) are not just draining the private health sector but also affecting the delivery of quality care, while undermining the sustainability of medical cover for millions of South Africans.
The figures come from actuarial models based on claims analysis, cross-checked against global norms, and HFA analysis shows that this range is consistent with WHO estimates of the global size of the problem.
In South Africa’s context, the percentage translates into a substantial diversion of funds away from genuine patient care, according to Thoneshan Naidoo, CEO of the HFA.
“If we could reduce FWA by even a third, that money could fund thousands of additional procedures, treatments and preventive interventions,” he said.
The term fraud, waste and abuse covers everything from deliberate acts, such as billing for services not rendered, to inefficiencies and duplication of tests or procedures.
“Abuse” refers to how providers may exploit loopholes or push ethical boundaries without necessarily breaking the law.
The numbers reported by the HFA show that fraudulent claims alone are estimated at about R10bn annually, while waste accounts for about R12bn, and abuse a further R4bn-R6bn.
The problem is amplified by the sheer volume of claims – more than 500m line items processed annually across the industry – making detection a complex and resource-intensive exercise.
“Medical schemes are under pressure from multiple sides,” said Naidoo. “We are facing escalating costs, economic strain on members, and expanding regulatory requirements. Fraud, waste and abuse undermines every effort to maintain affordability.”
Now, however, AI is playing an increasingly important role in healthcare management.
According to market research advisory firm Spherical Insights, the South African “AI in healthcare” market was valued at about R1.3bn only in 2023, but is projected to reach R55bn by 2033.
Technology is part of both the problem and of the solution. While digital systems have made it easier to submit and process claims, they also provide opportunities for fraudulent activity to be automated and scaled.
At the same time, advanced analytics and AI tools are emerging as powerful weapons in identifying irregular patterns and flagging suspect claims for investigation.
Naidoo sees collaboration as critical. “A priority is to foster greater co-operation between schemes, administrators, regulators and law enforcement,” he said. “We need a co-ordinated national approach to FWA, with consistent definitions, shared data and aligned penalties.”
However, the private healthcare sector is highly competitive, and data-sharing between schemes raises both commercial and legal challenges.
But the HFA has been working on frameworks that enable anonymised data pooling, allowing collective detection of trends without compromising competitive sensitivities.
Beyond detection, deterrence is vital. The HFA is advocating for stronger penalties and more visible enforcement.
“Prosecutions in healthcare fraud are relatively rare, and sentences often don’t reflect the seriousness of the crime,” said Naidoo. The perception that it is a low-risk, high-reward activity needed to be changed, he added.
The private healthcare sector covers about 16% of South Africa’s population but accounts for nearly half of total healthcare spend.
The Council for Medical Schemes said private expenditure in 2023 was R239bn, with medical schemes paying R197bn of that.
A 15% loss to FWA represents almost R30bn, which could fund a substantial expansion of primary care or reduce contributions for members across the board.
Globally, health systems have adopted various strategies to tackle the problem, from integrated fraud units in the UK’s National Health Service to AI-driven claims analysis in the US.
South Africa’s context is different, with a smaller insured population and a complex dual health-care system, but lessons can be adapted, said Naidoo, who believes the fight against FWA will strengthen the case for broader health system reform.
“We have the tools, the data, and the expertise. What we need is alignment and commitment from all stakeholders.”
Sunday Times article – How fraud, waste cripple health care (Restricted access)
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