A Probabilistic Programming Approach for Outlier Detection in Healthcare Claims

Healthcare is an integral component in people's lives, especially for the rising elderly population. Medicare is one such healthcare program that provides for the needs of the elderly. It is imperative that these healthcare programs are affordable, but this is not always the case. Out of the many possible factors for the rising cost of healthcare, claims fraud is a major contributor, but its impact can be lessened through effective fraud detection. We propose a general outlier detection model, based on Bayesian inference, using probabilistic programming. Our model provides probability distributions rather than just point values, as with most common outlier detection methods. Credible intervals are also generated to further enhance confidence that the detected outliers should in fact be considered outliers. Two case studies are presented demonstrating our model's effectiveness in detecting outliers. The first case study uses temperature data in order to provide a clear comparison of several outlier detection techniques. The second case study uses a Medicare dataset to showcase our proposed outlier detection model. Our results show that the successful detection of outliers, which indicate possible fraudulent activities, can provide effective and meaningful results for further investigation within medical specialties or by using real-world, medical provider fraud investigation cases.