Artificial Intelligence (AI) Solutions to Detect Fraud in Healthcare

May 28, 2024

Artificial Intelligence (AI) Solutions to Detect Fraud in Healthcare

Artificial intelligence: What comes to your mind when you hear the word artificial intelligence? Are they the sounds of robots, or is it about enhanced workflow? While these are part of the picture, there’s so much more to it.

Like me, most of you might be familiar with the transformative abilities of AI. No sector is untouched by it. Among all industries, healthcare is at the forefront of adopting this fantastic technology to overcome its myriad challenges. 

Healthcare fraud detection and prevention are among the challenges that it overcomes. Healthcare fraud? Does this term surprise you? Do you think that the healthcare sector is safe from scams? If so, it is the right time to reconsider. 

A report from the National Health Care Anti-Fraud Association (NHCAA) says that the financial loss due to healthcare fraud could be more than $300 billion a year in the US. These numbers shock me, as they do to you. Luckily, we live in the AI era, where it solves nearly every problem.

In this article, we will learn in detail about how AI helps the healthcare industry overcome the crucial challenge of fraud prevention and the benefits of AI.

What is AI fraud detection in healthcare?

What is AI fraud detection in healthcare?

As the name suggests, AI healthcare fraud detection is a process of identifying and preventing fraud using machine learning techniques. AI solutions for healthcare are trained on a large billing dataset to detect abnormal transactions or patterns. The AI model flags these transactions for further investigation by human agents. 

What excites me the most about these AI solutions is their ability to self-learn and improve for better predictive accuracy during fraud prevention. Businesses can utilize AI systems to stay one step ahead of the scammers and prevent financial losses.  

What are the different types of fraud in healthcare?

What are the different types of fraud in healthcare

Before we jump into the benefits and how AI prevents healthcare fraud, it is crucial to have a thorough understanding of the different types of healthcare fraud. Here are the five most common frauds in the healthcare industry:

1. Medical Identity Theft

Medical identity theft is right up there when it comes to fraud in healthcare. It is when someone steals your personal information, such as your name, insurance details, etc. This stolen information is used to render medical services. As a result, you end up facing substantial expenses.

According to a report by the Ponemon Institute study, 1.5 million American people are victims of medical identity theft every year. It leads to $28 billion in financial losses.

2. Kickbacks

Kickbacks are another type of fraud that happens in almost every medical practice. They occur when someone refers a patient to a hospital or clinic and gets payment or any other reward. Let’s take an example to make things more understandable.

For example, a patient goes to a clinic for a regular checkup. The doctor only prescribes the medication of a specific pharmaceutical company. In return, the company offers the caregiver gifts or money.

3. Billing for Unnecessary Services

The name of the fraud tells the story. It occurs when a doctor suggests unnecessary services or items to patients. The sole purpose of the scam is to increase the revenue by deceiving the innocent patients. 

For example, a healthcare provider tells the patient to undergo unnecessary medical tests or treatments when there are just mild symptoms that can be cured with simpler treatments. 

4. Billing for Services or Items Not Rendered (Phantom Billing)

Phantom billing is when healthcare providers charge the patient for the services or items not provided. Some caregivers create false records so no one can point fingers at them. 

For example, a patient is charged for the reports and medications that he never rendered. Another example to better understand fraud is when a hospital bills an insurance company for a surgery that never happened.

5. Unbundling & Upcoding

Unbundling occurs when patients are billed for services separately when they should be grouped together into one bill. On the other hand, upcoding happens when healthcare professionals bill patients for a more expensive service than what was delivered.

Read More: Top 10 ML and AI Trends in Healthcare 2024

Traditional Approaches to Healthcare Fraud Detection and Their Limitations

It isn’t like there were no solutions to detect and prevent healthcare fraud before the emergence of AI. However, these approaches have lost their effectiveness and credibility. This is because fraudsters have found new ways to deceive with technological advancements.

Some traditional approaches for healthcare fraud detection were:

1. Rule-based Systems

Rule-based systems aren’t that bad at detecting fraud. They operate on pre-defined rules set by experts. The system flags any transaction if it finds it abnormal or against the patterns. However, the fraudsters stayed one step ahead and have found new ways to trick the system.


These rule-based systems are not adaptive to changing fraud methods. The rate of false positives is way too high, which confuses human agents and causes them to overlook genuine cases. Moreover, these systems are unable to handle complex data.

2. Anomaly Detection Methods

Anomaly detection, also known as outlier detection, spots instances that deviate from standard patterns in a dataset. It helps identify unknown fraud patterns that rule-based systems might miss. Techniques like clustering and outlier analysis help pinpoint unusual behaviors that could indicate fraud.


These methods couldn’t keep up with the new and innovative methods. They can’t process and analyze a hefty amount of data. Moreover, these methods were time-consuming and were prone to errors.

How AI Helps in Healthcare Fraud Detection

In today’s highly digital world, every transaction happens over the internet with just a few clicks. Moreover, it is imperative to have a smart AI solution for healthcare as new ways of scamming are on the rise. 

AI healthcare fraud detection offers numerous benefits to healthcare organizations. These benefits include enhanced patient trust, financial loss prevention, better workflow efficiency, etc. Here is how AI is being used in healthcare for fraud detection:

We all know AI can process and analyze vast amounts of data to prevent fraud. Machine learning engineers gather vast transaction data and train an AI model to detect suspicious transactions. When any pattern or abnormal transaction occurs, the AI models stop it, flag it for further investigation, and assign a fraud probability score.

Moreover, these AI models learn from the new data and their past interactions to improve their accuracy. This way, AI helps healthcare organizations protect themselves and maintain their credibility.

Read More: 10 Benefits of Artificial Intelligence in Healthcare

What are the benefits of AI healthcare fraud detection?

What are the benefits of AI healthcare fraud detection?

Using AI healthcare fraud detection solutions offers numerous benefits. These tools help to increase operational efficiency and reduce the burden on professionals. Here are some benefits of AI in fraud detection:

1. Early Fraud Detection

One of the major benefits of AI in healthcare is its ability to monitor data in real-time. It helps quickly detect any abnormal pattern or transaction and flag it for further investigation. This early detection of potential fraudulent activities reduces the chances of major financial losses. 

With AI at work, detecting fraud that required days or even weeks in the past using traditional methods is possible within a fraction of the time.

2. Reduced Administrative Burden

Healthcare professionals are under an overwhelming burden. They have to take care of administrative tasks and have to deliver quality care as well. However, AI streamlines the process of manual data monitoring. This automation allows the human agents to focus on more crucial aspects.

3. Enhanced Accuracy

AI solutions analyze a vast amount of healthcare datasets with more accuracy than traditional methods. They detect suspicious patterns and abnormal trends quickly. Moreover, they learn from previous interactions and new data to enhance their predictive capabilities.

4. Versatility

We are all aware that digitization in healthcare has given rise to new fraud approaches. However, most AI systems are scalable and adaptable. This means that they can adapt to new fraud methods with equal efficacy. 

We are all quite aware of the growing healthcare data. AI solutions can scale up to handle the increased data within insurance and healthcare companies without losing efficiency.

5. Reduced Costs

The US healthcare sector experiences significant financial losses of about $300 billion. This daunts me even more when I think of the financial losses happening due to global healthcare fraud. 

Don’t you find it shocking? AI in healthcare fraud detection assists organizations in saving substantial sums by identifying and preventing fraudulent activities by recognizing suspicious patterns.


Overlooking fraud patterns means bearing substantial financial losses. Healthcare organizations can’t afford fraud and require smart technology to address this concern. AI healthcare fraud detection solutions are imperative, as they not only detect but prevent fraudulent activities to save a healthcare organization’s finances and reputation. These solutions allow healthcare organizations to stay one step ahead of fraudsters. We can confidently say that with technological advancements, we can expect a future where fraud is thwarted.

Prevent Fraud in Your Practice with Xeven Solutions AI Development Services

Is your healthcare organization facing fraud that results in huge financial losses? We are here to help you! Xeven Solutions is a dedicated healthcare AI development company that takes pride in working with organizations of all sizes, including Fortune 500 companies. Our team strives for excellence and goes above and beyond to deliver AI solutions that meet and exceed your expectations. Trust Xeven Solutions to prevent fraudsters from harming your organization’s reputation and maximize revenue opportunities.

About the Author: Taimoor Asghar

Taimoor Asghar is a Technical Content Writer with a passion for emerging technologies, continuously keeping himself updated with the latest industry and technological trends. He ensures that complex concepts are translated into informative pieces, catering to both experts and novices. He crafts engaging narratives through blogs, articles, and how-to guides that captivate audiences and inspire them to delve deeper into the ever-evolving world of tech innovation.
The owner of this website has made a commitment to accessibility and inclusion, please report any problems that you encounter using the contact form on this website. This site uses the WP ADA Compliance Check plugin to enhance accessibility.