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.

Scary Halloween Cartoon

This is from Kaiser Health News.  You can subscribe to this news service, where most of the content is far more serious, at this link

More Provider Consolidation in Face of Health Care Reform

Today’s Managing Health Care Costs Indicator is 53%

 That's the portion of cardiologists who have already sold their practices to hospitals (40%) or are strongly considering sale of their practices in the next three years  

Here's a link to a March, 2010 NY Times story on physicians abandoning private practice.

There are a series of articles out over the last few weeks about how health care reform is leading to consolidation.

On the provider side, the AMA News reports on insurer consolidation (including United Health Care taking over business from Health Net and Principal) and hospital consolidation (including a two hospital merger in Chicago and a physician group merger with a hospital in Michigan). 

Here’s a quote from the physician leader of the group merging with a hospital:

"Hospitals and physicians together are facing future expectations for rapid improvements in quality of care and value as accountable health networks that would be difficult to achieve independently," 

Kaiser Health Network in collaboration with NPR pointed out that there are few physicians hanging out shingles at this point; most join hospitals or groups.    What does consolidation mean for overall health care costs? 

Here’s Paul Ginsburg of the Center for the Study of Health System Change on provider consolidation:

 “..hospitals that employ doctors generally have more negotiating clout with insurers than doctors working in private practice. The price difference can be so big … that hospitals can pay the doctors more and ‘still have something left over’ for themselves.”

Kaiser Family Foundation also produced an impressive article last week on the varied prices of hospitalizations by county in California.  

My take is that provider consolidation is likely to lead to better integration, better access to capital, better implementation of electronic health records and other health care IT and better coordination – but higher unit prices. See this post from August on what questions regulators should ask about provider consolidation. 

I’ve argued earlier that the small “boutique” health plans with very little concentrated membership have low leverage in provider negotiations. Hence, they are likely to pay high prices – and their disappearance will likely lower overall health care costs.   More competition can be good – but too much fragmentation in the health insurer business is likely to lead to high unit prices.   

Health Plan Demands Lowest Rates and This Raises Prices

Today’s Managing Health Care Costs Indicator is 70

The US Department of Justice and the Attorney General in Michigan announced on Tuesday a suit against Blue Cross Blue Shield of Michigan (BCBSM) for demanding the lowest prices of hospitals in the state.   BCBSM has in place a “most favored nation” contract with at least 70 of the 131 acute care hospitals in the state.

Here is the Justice Department statement:

The department’s lawsuit alleges that the intent and effect of Blue Cross Blue Shield of Michigan’s MFNs is to raise hospital costs for competing health plans and reduce competition for the sale of health insurance. As a result, consumers in Michigan are paying more for their healthcare services and health insurance

Here is the BCBSM VP for Corporate Communications: 

Through this lawsuit, the federal government seeks to deny millions of Michigan residents the lowest cost possible when they visit the hospital.

Who is right here?  Is it really bad for society for BCBSM to insist for its members on always getting the lowest rate?

It certainly is!  

Most favored nation clauses feel like a good deal (“I get the best price.”) But what they really do is make it tough for suppliers to lower their prices for anyone else. See a recent blog on the effect of most favored nation pricing on pharmaceuticals.   The BCBSM contracts are especially inflationary –because they don’t merely demand the lowest price, but they specify how much higher a price other insurers would have to pay.

This is especially damaging to competition in Michigan, where BCBSM has a 60% market share.    There is no way for other insurers to compete effectively in that market, since hospitals cannot sell extra capacity at marginal prices.   Hence, despite the BCBSM cries that they are simply getting a good deal for their customers, BCBSM is causing all consumers in the state (including their own customers) to pay higher prices for health care.