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Medicare fraud: Back to stricter scrutiny?

The government swings from collaboration and education to punishment and sanctions. Physicians are concerned that the pendulum is swaying back toward enforcement at all costs.

By Markian Hawryluk, amednews staff. March 3, 2003.

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The federal government's approach to health care fraud enforcement fluctuates between two philosophies. One favors throw-the-book-at-them tactics. The other wants to use the proverbial book as an educational tool.

In the waning days of the Clinton administration, and particularly with the arrival of Janet Rehnquist as the Health and Human Services' inspector general in the Bush administration, the attitude shifted more toward education.

Federal investigators still vigorously pursued outright cases of fraud by physicians and other practitioners. But program integrity guardians shifted resources toward outreach and placed a greater emphasis on compliance programs and clearer iterations of the rules to help physicians avoid billing mistakes that might be mistaken for fraud.

Now that may be changing. There is a growing voice among federal lawmakers that it is time to toughen anti-fraud measures. That could mean a return to a time when fear of prosecution reigned supreme. It could also cause further discontent among physicians already unhappy with the Medicare program.

In the late 1990s, few health care issues were as big as fraud and abuse. With high-profile cases, such as the Columbia/HCA Healthcare investigations, the subject dominated not only public policy discussions but the evening news.

"It was really great to be involved in an industry where you could turn on the TV almost any night, turn to the national news, and see somebody you knew walking out of their office in handcuffs," said Joseph Antos, a health policy expert with the American Enterprise Institute.

Worried about the treble damages that could be levied against them, physicians took drastic measures to avoid exposing themselves to enforcement. For example, in 1998, complex cases of pneumonia cost Medicare an average of $7,400 each, while the simpler cases cost about $4,900, Antos said. Between 1997 and 1998, around the time the government was investigating HCA for alleged overcoding of pneumonia, complex cases fell by 43,000, and simple cases rose by 42,000.

"That's a pretty amazing result. It proves that compliance activities can actually improve health status. Scientists ought to look into this," Antos said, tongue-in-cheek.

It's unclear whether Medicare was paying too much in 1997 or too little in 1998, he said. What is clear is that when clinicians saw their colleagues on TV, they made a decision not to bill as aggressively.

Addressing physicians' concerns

The fear that led clinicians to shortchange themselves was unwarranted, said Mac Thornton, chief counsel to the inspector general for 12 years, who is now with the law firm Sonnenschein Nath & Rosenthal. Nevertheless, OIG officials felt they had to respond to physicians' perception of the risk.

"There was never a policy of going after physicians for honest mistakes," Thornton said. "We wanted everyone to be aware that claims were being scrutinized more closely in the 1990s, but we didn't want to engender a degree of fear. There were some stories circulated that were basically either not true or hyped up that seemed to illustrate that fear was justified."

Doctors' worries fueled a backlash against the federal government's enforcement policies. Physician groups lobbied the White House for changes and pressed Congress to approve a regulatory reform bill, which ultimately did not pass. But the Bush administration took some steps to address physicians' concerns. For example, it is working on a host of recommendations made by its regulatory reform committee.

Thornton said during the last three years, the OIG has made a conscious effort to improve its communications with physicians. With a greater emphasis on education and compliance, the OIG has helped physicians to better understand what's required of them and to put systems in place to avoid billing errors that might be mistaken for fraudulent activity.

Those efforts have, in part, led to a plateau in enforcement, said Gabriel Imperato, a civil health care fraud defense attorney with Broad and Cassel in Fort Lauderdale, Fla., and counsel for the IG from 1977 to 1987.

"A lot of the cases that we're reading about today are cases that are winding up, that have been on the shelf for some time," he said. "I don't see a lot of new cases, or new initiatives like I did three years ago, and I see less criminal matters."

Imperato said the plateau is also due to reordered priorities in the law enforcement community, including the reallocation of FBI resources toward fighting terrorism and corporate fraud. And while whistle-blowers are still bringing forward False Claims Act cases, the Dept. of Justice is doing a better job of winnowing out those made up by entrepreneurial lawyers, he said.

The tide of anti-fraud activity has crested and is now receding, Imperato said. "There will always be opportunities out there for people to get themselves in situations that are of legal questionability. It's just a matter of when somebody wants to give some attention to it."

Getting tough

Some lawmakers and experts believe the OIG and the Centers for Medicare & Medicaid Services have gone too far to placate physicians and other health practitioners.

"There are some critics who worry this is a pendulum and that you could easily swing too far in one direction," said Leslie Aronovitz, director of health care program administration and integrity issues at the General Accounting Office. "You have people who feel that this is kowtowing to providers. There are people who worry we are now going in the direction of being too light on industry."

Chief among them is Sen. Charles Grassley (R, Iowa), chair of the Senate Finance Committee. Since the November 2002 elections, he has been extremely critical of the OIG's handling of several cases and questioned the departure of several high-ranking officials.

"I'm concentrating now on the HHS Inspector General's office, which I don't think is functioning properly," Grassley said. "In terms of people and policy, the HHS Inspector General's office looks and acts far differently today than it did just 18 months ago."

Grassley said he was "troubled" by reports that decision-making at the OIG is subject to outside influences and perhaps is not as independent as it should be. He said OIG under Rehnquist has adopted a "kinder, gentler" policy on corporate integrity agreements, the corrective action plans that practitioners adopt to stay in Medicare after a fraud investigation. He criticized the establishment of a 5% "error acceptance rate."

"I don't think there should be any set acceptable error rate when it comes to the Medicare trust funds," Grassley said.

He has asked the GAO to conduct a management review of the OIG and has pledged to hold oversight hearings once the review is complete.

Other lawmakers are also critical.

"The new IG is becoming a spokesperson for the people she's supposed to regulate," said Rep. Fortney "Pete" Stark (D, Calif.). "The Bush administration does not believe in government regulation. They've given up, and the statistics bear that out."

Stark pointed to the most recent OIG calculations of the improper payment rate in Medicare, an estimate of fee-for-service payments that do not comply with Medicare rules. In fiscal 2002, the error rate was 6.3%, unchanged from the previous year, but down from 13.8% in fiscal 1996 when the OIG first measured the error rate.

"We've had a good record of reducing this $14 billion a year in incorrect payments, about half of which we think is fraud, and about half of which is just mistakes," Stark said. "This is the first period in which the fraud part has not decreased."

Meanwhile, Sen. Susan Collins (R, Maine) announced she would hold hearings of the Senate Government Affairs Committee to look into anti-fraud efforts after Medicare made the GAO's list of government programs at high risk for fraud for the 13th consecutive year.

Health care fraud expert Malcolm Sparrow, a Harvard professor, said he does not expect fraud enforcement would get any tougher soon.

"The whole government approach to this is mealy-mouthed and inadequate and always has been," he said. "The rhetoric when the Bush administration came in was definitely that the pendulum had swung too far [toward enforcement], maybe we have to push it back."

Sparrow said the media turns attention to fraud enforcement when there is the occasional scandal but without a systematic accounting of the problem, there is little likelihood any meaningful strengthening of safeguards will occur.

The OIG declined to comment on the accusations or on the prospect that anti-fraud activities might be heightened as a result. A spokesman for the inspector general stressed the agency has long relied on communications, including fraud alerts, safe harbors, compliance plans and educational efforts, to prevent fraud and innocent errors.

Commitment to compliance

At a February conference, Rehnquist expressed continued commitment to the compliance approach.

"I do realize that some continue to question the value of compliance and whether [it] is a good investment," she said. "Compliance is more important than ever to this industry. With new payment systems, expanding benefits, changing regulations -- these factors all create a constantly changing environment for health care organizations, and they must have systems in place to stay on top of the program requirements."

Rehnquist also said CMS was working on a pilot project that would define and measure the effectiveness of compliance programs. If successful, that tool could be used to identify organizations least likely to experience problems with the integrity of their systems. "With this knowledge, we can dedicate our resources to those providers that pose the greatest risk to our federal health programs," she said.

The American Medical Association has remained a staunch opponent of health care fraud, but has found itself defending physicians who struggle to keep up with the ever-changing and highly complex set of Medicare billing rules, said Richard F. Corlin, MD, the Association's immediate past president.

"When fraudulent behavior is detected, it should be vigorously prosecuted, period. There's no excuse for it. There's no reason for it to exist. It should be dealt with very firmly," Dr. Corlin said. "The real issue is that while there is some fraud, there is not a lot of it. What there is, is inefficient, improper, and inaccurate billing done."

Dr. Corlin called for Congress to pass regulatory reforms that would simplify the billing process as well as force carriers to provide written guidance on which physicians can rely. The government has tried to set policy and regulations based on the small percentage of dishonest operators, rather than to work with the honest physicians, he said.

"We're seeing clearly some improvement, but it still has a long way to go." Dr. Colin said.

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