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08/07/2013

Fraud and Measurement

A recent article on the CNN Website: Rehab racket: Frauds, felons and fakes strikes us as an example of a failure to measure.  But from reading the article one would come to the conclusion that it is about the failure to investigate.  We think investigation is an inefficient model for validating the delivery of a service. 

Why is measurement the right metaphor?   A measurement regime forces a provider to either justify a service event honestly or fraudulently.  Outright fraud can be very hard to stop given the creativity of those perpetrating the fraud.  But if you require the potential perpetrator to submit a measurement that justifies service delivery you up your odds of fraud detection.  A good measurement protocol tells a story.  That story will contain subtle clues as to the whether or not the story is true.  Computers are good at catching these situations efficiently and generating those red flags.  Every measurement protocol has an implicit normal pattern across its measures.  Some patterns are likely, some are highly unlikely.  For example, some items in a protocol may be highly correlated.  If the scores on either item diverge widely this is a red flag.  Someone who is entering many items fraudulently enters in a particular pattern - it may be too random, or have way too little variation to be real, or be too much like another submission.   Finally, in measurement systems when repeat measures are required, systematic inflation of time 1 to time 2 improvements also have a pattern that can be compared to a realistic or population-verified trajectory. 

But with just the submission of an invoice for services and some free text,  these patterns are much harder to catch.  Certainly it's possible,  but it is much more difficult and much less efficient.  The measurement model is certainly more efficient than sending investigators to hundreds of agencies.

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Thanks!