Day Five of Good News: Health Care Fraud

Today’s Managing Health Care Costs Indicator is $3 billion

Health care fraud is rampant and unconscionable.  Fraud fighters have made real progress in the last year.  

Many commentators think 10% or more of total health care costs represent actual fraud – as much as $250 billion a year. We’re not talking about honest mistakes (such as billing for a C-section that was necessary and actually performed but using the wrong code). We’re not talking about ‘abuse,’ such as billing for a laboratory test that was actually performed but medically necessary.  We’re talking about downright heists, like setting up a fake laboratory company, purchasing patient Medicare numbers, billing and collecting reimbursement, and shutting down the operation before anyone asks any questions. (Great Reuters story about these phantom firms at this URL)

The good news is that health care fraud is becoming more difficult due to aggressive enforcement action by the federal government, many state governments, and many private health plans.  The Department of Justice has had the second year of record settlements, including a $3 billion settlement with Glaxo Smith Kline for improper marketing of the diabetes drug Avandia, which has been associated with increased risk of heart failure.

1. Here’s why I believe health care fraud will decline in the coming years
2. New dollars for fighting health care fraud as part of the Affordable Care Act.  
3.  Improved technology to detect fraud before payment, and willingness to submit claims to preadjudication audit. Medicare and health plans historically paid bills and then “chased” fraudulent providers after the fact. In many instances, that was simply too late
4. Transition to bundled payment, which is less amenable to fraud than fee for service
5.  Increased transparency – which will make some of the egregious cases visible to journalists who can start the investigation ball rolling

Here’s a list of pending health care fraud settlements from an advocacy group, Taxpayers Against Fraud.  

Health care represents such a large part of the economy that it will never disappear.  However, I believe that current efforts are already paying off.

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Unnecessary Double Chest CT Scans

Today’s Managing Health Care Costs Indicator is 75,000

Saturday’s New York Times had a great example of using variation to identify waste in the health care system

It’s almost never necessary to do two chest CT scans in a single day – one without contrast, the other with contrast.   The ordering physician should know in advance whether she is looking for disease that requires imaging of the vasculature system. 

It’s bad to do sequential chest CT scans of patients for at least three reasons.  Each chest CT scan is the equivalent of 350 chest x-rays – and we should avoid the extra radiation exposure, which does cause some cases of breast and lung cancer. The  cost of CT scans is high – CMS reports that these duplicate CT scans cost Medicare alone $25 million.  Doing extra tests poses the danger of finding “incidentalomas,” findings that are not relevant to health, but that require additional tests which pose new health risks and additional expenses.

Yet there are some hospitals that do double chest CT scans on almost nine of every ten patients who get a single chest CT.   Many hospitals are under 1% - yet the national average is 5.4%.  75,000 Americans had double chest CT scans in 2008.

I encourage you to look at the interactive geographic map showing excess utilization – it shows pockets of overutilization including Texas, Oklahoma, southern California, and the midsection of the country from Illinois to Mississippi. 

Fee for service payment is one of the culprits here – hospitals with high rates of repeat chest CT scans make more revenue – and for a high fixed cost item like CT scans, make even more margin on this service.   However, there is a straightforward fee for service fix.  We should simply bundle together any two chest CT scans done on the same person at the same facility within 48 hours of each other. 

By the way, CMS also announced on Friday that it will use predictive modeling to proactively identify fraud in health care bills.  CMS until now has paid all submitted bills, and chased any fraudsters retrospectively identified.  Many of those billing CMS fraudulently have disappeared long before Medicare could recoup money -- so this could help lower Medicare costs.

These are two good examples of studying variation to improve health care cost-effectiveness.

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Obama Administration Shows Medicare Savings

Today’s Managing Health Care Costs Indicator is $120 billion

The Obama Administration issued a report demonstrating $120 billion in Medicare savings over the next five years as a result of the Affordable Care Act.  This coincided with the annual report from the Trustees of Medicare and Social Security which stated that the Medicare hospital fund will become insolvent five years earlier than previously projected, due to lower revenue from the lackluster economy and continued increases in the cost of health care.

These savings claimed by the Obama administration look highly credible to me. The vast majority of dollars claimed are from payment decreases – which are straightforward and should yield the savings anticipated.  Health plans will object to decreased profit margins, and providers will object to decreased payment updates, but the Obama administration has all the authority necessary to implement these.  The fraud estimate looks quite low, given that the WSJ reported last week that federal prosecutors are seeking $1b from Johnson and Johnson  alonefor marketing abuses for the antipsychotic medication Respirdal. Competitive bidding for durable medical equipment is likely to save the dollars projected.

The savings from decreased readmissions and complications are harder to predict.   It’s likely that the cost pressures on health care providers will pressure them to continue to reengineer their processes. Don Berwick’s 100,000 lives campaign when he was at IHI was very successful, so I think it’s highly likely Medicare’s effort will be as well, even if his tenure as the CMS Administrator is short.

Of course, this is not nearly enough.  The ten year cost of the “doc fix,” to fund continued physician payment levels to avoid what would be a 25+% cut next year, will be $300 billion.  

But at least this is a start.

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Overturn Ban on Divulging Provider Medicare Billing

Today’s Managing Health Care Costs Indicator is 1979

It was 32 years ago that a federal court ruled that Medicare could not publicly release the payments to individual providers.  The American Medical Association http://www.ama-assn.org/amednews/2011/04/04/gvl10404.htm fought hard against transparency of Medicare payments, and has aggressively defended this decision in court, in the legislature, and in public opinion. 

However, a recent Wall Street Journal expose using the Medicare 5% claims file has shown how private parties can “mine” the Medicare data to ferret out potential fraud.  Legislation to overturn this ban was recently filed by Ron Wyden (D-OR) and Charles Grassley (R-IA). 

Medicare providers, including me, are federal contractors.    Medicare represents 20% of total health care spending and about 23% of total  federal spending now, and this will increase as the baby boomers age in to Medicare.  It’s no longer reasonable to maintain the cloak of secrecy around provider payment.  We seek sunshine in federal procurement –and expect to learn how much military contractors are being paid for toilet seats.  It makes sense for physician and hospital Medicare payments to be a matter of public record.

My take on arguments against this transparency:

1. Patient privacy might be inadvertently compromised. It could be easy to “break” the scrambling of patient identifiers, especially as large bills were disclosed that included claims for unusual illnesses.  We should seek physician-level disclosure first, and add disclosure of deidentified patient-level data only once we are certain that patient confidentiality can be maintained.  HIPAA provides robust protection against disclosure of data that can be tracked to individual patients.
2. Providers might raise their prices when they see how much others are being paid for similar work.   Medicare has uniform fee schedules for most physician and hospital procedures.  Hospitals invest heavily in legislative and lobbying efforts to enhance fees, and I don’t see why this would increase if the rates were transparent
3. Activists could use claims payment data to target specific physicians.  For instance, Senator Rand Paul caught some flak in last year’s campaign for opposing government programs while accepting Medicare payment for his ophthalmology practice.    I think this is a concern – which is likely shared by the record number of physicians in the current Congress,   Transparency in fee schedules could “shame” physicians into being more discrete in their billing practices, which would be a social benefit.
4. Marketers could use this information to target physicians for promotional efforts.  Again, this is probably a reasonable concern.  However, information about physician economic status is readily available to marketers already, so consumer marketing isn’t likely to increase.   This information could help tailor the marketing efforts of those selling ancillary medical services (like implantable durable medical equipment.)   These manufacturers already have a clear idea of high utilizing physicians.

We underfund the administrative function of Medicare, and as a result it’s hard to police against fraud and abuse.  Full transparency in claims payment to providers can help “crowdsource” anti-fraud efforts, and thus ultimately lower health care costs. 

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Fraud in health care

Today’s Managing Health Care Costs Indicator is $3239

The Wall Street Journal  has performed an important service by suing the Centers for Medicare and Medicaid Services (CMS), and has obtained a claims paid database showing Medicare physician payments.  Because of a 1977 court ruling, they are prohibited from naming individual physicians who received government payment.

The WSJ did a bit of data diving, and discovered that a single New York physician, a family physician with no specialty training, received an estimated total of over $2 million in payments from Medicare in 2008.  (WSJ extrapolated this from $142,500 in payments for a mere 44 patients, or $3239 per patient. The claims set represents 5% of the total claims paid during 2008).  There were another two dozen physicians who also had suspiciously high claims – and a number of them had already been investigated.

Just for perspective, total care for those over 65 costs around $14,700 per year   This includes hospitalizations, chemotherapy, and all sorts of expensive care.  Primary care would never represent a fifth of the total cost of care of an elderly population.

This physician certainly didn’t make this money through office visits.   Au contraire!  The vast majority of the payments were for very expensive procedures – like sleep studies, ultrasounds, and neurologic tests.  Her billings increased by a factor of 16 from 2006 to 2007 – often a flag for overuse or frank fraud.  Some of the fraud experts called on by the WSJ said that this physician was highly unlikely to have performed all of these procedures.   Her rejoinder in the WSJ:

The New York-area physician, in the interview, denied any wrongdoing and said she only administered tests "recommended by the [medical] literature." She added: "I read a lot of literature."

The physician said that she stopped doing most of these tests since 2008, after an audit by a Medicare contractor.  That’s a sign the system is working at least a bit – this was investigated by the government before the WSJ got its hands on the data, and the physician says she stopped the most egregious billing.  Still, she has not lost her privileges to participate in Medicare, and there has been no restitution for previously billed tests.  We also don’t know for sure that she committed fraud.

Fraud and abuse cost the health care system billions of dollars a year – and while there are some cases that appear egregious and clear, there are many cases where it’s much harder to draw a bright line.  Medicare has a harder time fighting fraud because

-        Physicians don’t need to be credentialed for Medicare, as they are for private health plans.  If a physician has an active license and agrees to participate, she is in.  

-        Medicare has very low administrative costs. That’s good – because the dollars are spent on medical care instead of bureaucrats.  It can be bad, though, since there are fewer administrative people to guard Medicare’s precious resources.   

-        Medicare can ban a physician from participation in the program, but it rarely does so.  CMS represents a large portion of participating physician income, so physicians will usually fight adverse determinations in court.   

Clearly, fraud and abusive billing are damaging

-        Money is wasted

-        Patients are exposed to unnecessary tests, which can themselves be dangerous, and can lead to incidental findings that cause patients more inappropriate discomfort, risk and expense

-        We lose faith in the system.

Systematic approaches to fraud, such as this kind of data mining, are important adjuncts to traditional means of finding fraud, such as patient complaints and tip lines. If we cannot trust a physician not to recommend highly remunerative but unnecessary tests, we cannot trust her to take care of us in illness.

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