Why The United States Health Care System Costs So Much – Part Seven – Fraud and Abuse
Health Care Fraud and Abuse. You read about this periodically in the newspapers or hear about it in the news feeds. I’m not going to get into what people normally think of when they think of health care fraud and abuse, you can get all of that at this prestigious website:
National Health Care Anti-fraud Association
First, here are the definitions of Fraud and Abuse:
Fraud – Medicare defines fraud as typically including any of the following:
- Knowingly submitting, or causing to be submitted, false claims or making misrepresentations of fact to obtain a Federal health care payment for which no entitlement would otherwise exist
- Knowingly soliciting, receiving, offering, and/or paying remuneration to induce or reward referrals for items or services reimbursed by Federal health care programs
- Making prohibited referrals for certain designated health services
Abuse – Medicare defines abuse as:
Practices that, either directly or indirectly, result in unnecessary costs to the Medicare Program.
Abuse includes any practice not consistent with providing patients with services that are medically necessary, meet professionally recognized standards, and are priced fairly.
Commercial health plans basically follow these rules, just insert the health plan name where it says Medicare.
Well, we already know the “priced fairly” element is violated all the time but no one is held accountable.
Anyway, there are several things that go on that could be categorized as fraud and abuse that you rarely, if ever find on the Internet.
First a little background.
It turns out, no one seems to know the full extent of fraud and abuse (F&A). This is because insurance companies don’t know if F&A occurs until they find it. They generally have no systematic, accurate way of finding all of it. A lot of times it is either a whistleblower or the folks doing the frauding get so outrageous you can see an unusual blip in claims payment reports. Most reports on F&A are about recoupments of what was found, not the actual total of what was actually F&A.
So, you’ll read about how much Medicare recovered in a year. You might get estimates of what some actuarial institution think is the amount of F&A going on. So much so that the FBI estimates that F&A billings are generally between 3 and 10% of the total spend. So, since the USA spends about $3 trillion a year on health care you’ll see estimates of between 90 and 300 billion dollars a year. Quite a spread.
As a Medical Director of several health plans, I can tell you this is true. They don’t know how much F&A is going on, just how much they found. Then how much they “recouped”. They had the same problem with provider contracts. They knew, pretty much, when they underpaid a provider, because the providers would file a complaint. They didn’t know when they overpaid providers because; guess what, when providers were overpaid, they rarely complained to the health plan. They played the odds that the health plan wouldn’t figure this out.
Here are some true stories.
There was a physician group in the network of a health plan I worked for who signed a capitation agreement with the health plan. This meant, they got a fixed lump sum per member of the health plan that was assigned as a primary care patient of the physician group. The contract configuration department in IT forgot to shut off the fee-for-service switch in the claims payment system. The physician group got paid both capitation and fee-for-service for six months before someone in the claims department figured it out. It’s hard to comprehend that the accounts receivable folks at the physician group didn’t notice this, getting large monthly checks in addition to their capitation payments. Or how about the physician group’s finance department? Oh, sorry, we’re talking about those finance folks again. Of course they’re going to be happy about more cash coming in. Let’s roll the dice!! They owed $1.5 million after six months.
Most of the overpaid (against their contract) “abusers” are specialists. When you go to their offices and explain how they were overpaid, they act shocked and surprised. I actually started thinking that maybe, at conferences specialists go to, they have a seminar on how to act surprised when the health plan comes and tells them they’ve been overpaid! In one health plan, a specialist group was overpaid for 3 years and owed several million dollars. After the shock and surprise, they then cried about how hard it would be on their business to give the money back. I guess they have crying seminars, too. What really should have happened is they should know when they are being overpaid and report it to the health plan, just like when they figure out that they are being underpaid. That always amazed me how underpayments were easily detected by providers but overpayments weren’t. Always sounded fishy to me.
Here’s another one. I joined a health plan who had been in the Medicare Advantage business for about 2 years. I’d been involved with Medicare Advantage-type programs (they had various names over time, like, Medicare Risk plans) for about 15 years. At the first Medicare meeting I went to, the staff and finance folks were complaining about excess costs in out-of-network hospitals because, since the hospitals were out-of-network and didn’t have a contract with the health plan, the health plan had to pay full billed charges for admissions, ER visits, tests, etc., at those hospitals. The meeting was a steering committee and had legal and compliance folks on it. I told them, my understanding was, if a hospital is a Medicare certified hospital (which >90% are), they can’t accept more than Medicare rates for any Medicare beneficiary. The staff, backed up by the legal and compliance folks, said I was wrong, they had the Medicare directive about this. They had to pay billed charges. I asked them to bring it to the next meeting.
At the next meeting they brought copies of the directive. It was an internal-to-the-health plan document that had nothing directly from Medicare in it. I told them that it wasn’t acceptable; I wanted the actual Medicare rules describing this. At the next meeting they all came in with sheepish grins, as I had been correct. They had the Medicare rules describing exactly what I said (See why I have an issue with these legal and compliance folks?). Anyway, the Medicare staff immediately got reports from finance and proceeded to “recoup” all of the over payments by re-processing the out-of-network hospitals’ claims against the Medicare fee schedule and demanding a refund of the difference between the fee schedule amount and the hospital’s billed charges (which you know now are incredibly whimsical and over-priced). We got millions back.
The thing is, all of those hospitals knew they were being overpaid. They said nothing. When the health plan figured this out, the legal and compliance folks didn’t pursue reporting them to Medicare because they paid the health plan back. That’s sort of like capturing a bank robber who hadn’t spent any of the money and letting him go because you got the money back. Isn’t it?
So you can see why the F&A numbers can be spurious.
Here’s another provider abuse issue that no one can enforce. Some providers have patients come back to their office more often than they need to, just to increase their revenue. You can see this in utilization reports where some providers have visits per year for some conditions that are 3-4 times the majority of the providers in that field (could be physician, Physical Therapist, whichever). No one seems to be able to do anything about this except tell the provider they are variant and asking them to stop doing it. Isn’t that abuse? “Not medically necessary”?
DME (Durable Medical Equipment) providers use this tactic. They get a prescription for oxygen therapy for a certain amount of time. The time runs out and the physician doesn’t renew the prescription. The DME provider doesn’t go to the patient’s house to pick up the oxygen unit and keeps billing the health plan. The health plan doesn’t know the physician didn’t renew the oxygen. Several months later, the DME company picks up the unit, but has now billed the health plan for several months of unnecessary charges. Usually a health plan finds this when they do benchmarking against national utilization statistics. Isn’t this abuse? I’ve never seen a health plan report a DME company for this. Isn’t that “not medically necessary”?
This one is one that really irks me. It’s been going on since I first started being involved with being in capitated physician groups and the insurance industry.
A patient gets admitted to a Psychiatric Hospital. The hospital figures out what the health plan’s hospitalization benefit is. Like, let’s say four weeks. They keep the patient in their hospital for the full four weeks whether the patient needs it or not. They discharge the patient on the last day of coverage. Six months later, the patient again needs hospitalization. The hospital refuses to accept the patient because the patient has no insurance coverage for it.
The Skilled Nursing Facilities and Acute Rehabilitation facilities do the same thing. They know the coverage limits, usually a number of days, that the patient has for their services and keep the patient until they exhaust their benefit, whether they need the services or not, then discharge them. They technically meet “medical necessity” because medical necessity is based on the number and type of services being provided, not the functional status of the patient (which is assessed by the staff in the offending institution anyway, no external party assessment). Result? Wasted health care dollars for, really, unnecessary services.
OK, that’s enough for F&A that’s not considered F&A by health care providers.
Then there are patients committing F&A. What? A patient can commit F&A?
Yup. There are two ways.
The first is, when applying for health insurance that gets “underwritten” (meaning the premium is based on the patient’s personal “profile”, like how many conditions they have, age, gender, etc.) which, in turn, determines the amount of their premium. This will be a common occurrence if the Republican Obamacare repeal and replace plans go through.
What happens is, people lie on their applications to get a better premium rate. This is not an uncommon happening. As a Medical Director, I had to review cases that the F&A unit nurse staff couldn’t determine were true fraud cases. So I saw this personally.
The second is, people give other people their insurance card and some of their credentials, like a driver’s license, and have the other person get health care services on their health plan. This occurs in Commercial plans to some minor extent, but it is more prevalent in Medicaid in states where there is a fair amount of uninsured or under insured folks. Poor neighbors “helping” other poor neighbors.
FYI, the health plans have a lower threshold for filing charges with the Attorney General for patients than for providers. Yes, stricter with their customers than their business partners. Imagine that!
So, that’s my take on Fraud and Abuse. Or, when is fraud and abuse not fraud and abuse?
Or, providers and patients behaving badly.