Detecting Fraud, Waste, and Abuse in Healthcare Claims using AI: Applying Isolation Forest to Claim Analytics

Healthcare fraud, waste, and abuse (FWA) are among the most significant drivers of financial inefficiency in healthcare systems worldwide, with estimates suggesting they contribute to as much as 10% of total healthcare expenditures. In the United States, these losses are estimated to exceed $300 billion annually. This paper presents a machine learning approach using Isolation Forest, an unsupervised anomaly detection algorithm, to proactively identify potential FWA in healthcare claims data. Based on real-world patterns, a synthetically generated dataset was created to simulate both legitimate and fraudulent billing behavior. The model achieved high performance with a precision of 0.81, recall of 0.82, F1 score of 0.81, and ROC-AUC of 0.90. Through case studies and comparison of performance with baseline models, we demonstrate the practical applicability of this approach in real-time fraud monitoring. The study also discusses key implementation considerations, including ethical and regulatory factors, explainability, and system integration. We argue that intelligent anomaly detection models can be integrated with payer systems to improve financial stability and healthcare affordability.

Authors

Publication Details

Published
2025-09-08
DOI
https://doi.org/10.36287/setsci.24.3.023
Primary Topic
Imbalanced Data Classification Techniques
Type
article
Field-Weighted Citation Impact
0.00
Controls
|||
ALL TIME
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
article

Detecting Fraud, Waste, and Abuse in Healthcare Claims using AI: Applying Isolation Forest to Claim Analytics

Naren Chandra, Vineel Arekapudi
Imbalanced Data Classification Techniques
article

Detecting Fraud, Waste, and Abuse in Healthcare Claims using AI: Applying Isolation Forest to Claim Analytics

Naren Chandra, Vineel Arekapudi
article en

Abstract

Healthcare fraud, waste, and abuse (FWA) are among the most significant drivers of financial inefficiency in healthcare systems worldwide, with estimates suggesting they contribute to as much as 10% of total healthcare expenditures. In the United States, these losses are estimated to exceed $300 billion annually. This paper presents a machine learning approach using Isolation Forest, an unsupervised anomaly detection algorithm, to proactively identify potential FWA in healthcare claims data. Based on real-world patterns, a synthetically generated dataset was created to simulate both legitimate and fraudulent billing behavior. The model achieved high performance with a precision of 0.81, recall of 0.82, F1 score of 0.81, and ROC-AUC of 0.90. Through case studies and comparison of performance with baseline models, we demonstrate the practical applicability of this approach in real-time fraud monitoring. The study also discusses key implementation considerations, including ethical and regulatory factors, explainability, and system integration. We argue that intelligent anomaly detection models can be integrated with payer systems to improve financial stability and healthcare affordability.

Openalex Percentile: Top 87%
Imbalanced Data Classification Techniques
AI Navigator

Ask Laika to Summarize, Analyze, and Connect papers live on the map.

Summarize Papers & Methodologies

Extract key findings, datasets, and comparative methods across publications.

Benchmark Rankings & Visual Analytics

Rank top research institutions, authors, funders, topics, and journals by Field-Weighted Citation Impact (FWCI) and paper volume with instant charts.

Connect Distant Disciplines

Bridge topological clusters on the map to find hidden collaborative intersections.