New Pilot Program to Audit Hospital Bills

Posted on January 29, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Medicare Program Promotes Bounty-Hunter “Zeitgeist” Mentality

[By Dr. David Edward Marcinko; MBA]

Publisher-in-Chief dem2

According to a recent report in the Wall Street Journal, hospital groups have launched a vigorous campaign against expanding a pilot program to audit Medicare claims. And, it seems the most onerous aspect of the program is a contingency fee-schedule that encourages auditors to be aggressive.

Evolving Program Details

The program initially launched in California, Florida and New York and soon to be expanded nationwide, recouped $247.4 million in overpayments in fiscal year 2007 alone. It relies on private-sector auditing firms to examine claims filed by hospitals and other medical providers and then pays them contingency fees based on how much the government saves. 

Outcomes-to-Date

As an example of its success, the WSJ reported that in FY 2007, auditors identified $357 million in overpayments [$17.8 million or 7.1% of which were overturned on appeal], according to the Centers for Medicare and Medicaid Services [CMS]. Payments for contingency fees and other administrative expenses totaled $77.7 million. Auditors also found $14.3 million in Medicare underpayments.

Support versus Criticism

While supporters of the program say the contingency fees serve as an incentive, critics say it encourages auditors to rely on a “‘bounty hunter’ payment mechanism.”  

Same old Economic Song

Of course, most long-time observes of the compliance and audit scene realize that this zealous zeitgeist mentality is not new.

For example, under the Health Insurance Portability Accountability Act [HIPAA], the Department of Health and Human Service [HHS] started an “Incentive Program for Fraud and Abuse Information” [IPFAI] almost a decade ago. 

In that January 1999 pilot program – which continues in modified form – HHS paid fees ranging from $100-1,000 to Medicare recipients who reported abuse. To assist patients in spotting fraud, HHS even published examples of physician potential fraud, which include: 

  • Medical services not provided
  • Duplicate services or procedures
  • More expenses services or procedures than provided (upcoding / billing)
  • Misused Medicare cards and numbers
  • Medical telemarketing scams
  • Non-medical necessity, etc. 

To discourage flagrant allegations regulations require that reported information needed to directly contribute to monetary recovery for activities not already under investigation. 

Assessment

Nevertheless, expect a further erosion of patient confidence, as CMS continues to view all healthcare providers – and now hospitals and related healthcare organizations – in the same light as “bounty- hunters”. 

Ironically, this precise same phenomenon was reported in both the first and second editions of the book “The Business of Medical Practice”. 

And so, please remember all medical colleagues – forewarned is forearmed. 

More information: http://www.springerpub.com/prod.aspx?prod_id=23759 

Speaker: If you need a moderator or a speaker for an upcoming event, Dr. David Edward Marcinko; MBA is available for speaking engagements. Contact him at: MarcinkoAdvisors@msn.com

 

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6 Responses

  1. Ann Miller; RN, on January 29, 2008 at 6:53 PM said:

    Past Governmental Anti-Fraud Success

    As demonstrated in the post above, the federal government has grown increasingly effective at Medicare fraud recovery, but state Medicaid programs lag behind, according to New Directions for Policy, a Washington, DC research firm.

    For example, in the case of Medicare fraud recoveries a few years ago, the federal government’s return on investment improved to nearly 9-to-1 in 2001 from 8-to-1 in 2000. Medicare fraud recoveries from healthcare providers grew 71% to $1.2 billion in 2001, while enforcement costs increased 6.3% to about $72.8 million.

    State Medicaid fraud collections, totaled $43 million in 2001. And the federal government, which recovered $2.85 billion from Medicare fraud from 1997 to 2001, collected $115 million in Medicaid fraud recoveries during the same period, according to Medicaid Policy, a Washington consulting firm.

    As so, the suggestion by Dr Marcinko that – forewarned is forearmed – is a good one!
    -Ann

    Like

  2. Barbara, on January 30, 2008 at 3:46 PM said:

    THE WHISTLE-BLOWERS,

    Did you know that whistle-blowers tipped off the government to $1.3 billion worth of fraud, largely at hospitals or other health care providers?

    Yep, it true!

    In all, about $3.1 billion in settlements was recovered, a record amount – from individuals and companies during the 2006 fiscal year, while whistle-blowers were paid $190 million over the year for alerting the government to the fraud. Whistle-blowers have helped the government recover an estimated $18 billion since 1986, when Congress approved laws to strengthen their protections.

    It seems the “Executive-Post” is on target, once again!
    Source: Associated Press, November 21, 2006.

    -Barbara

    Like

  3. Sharon, RN, on January 30, 2008 at 6:32 PM said:

    Did you know that the recent push to limit whistle-blowers is realy “old news?”

    I mean, the American Hospital Association (AHA) and three other provider groups urged the U.S. Supreme Court to limit the definition of who qualifies as a “whistle-blower” plaintiff in False Claims Act [FCA] lawsuits, back in 2006.

    For example, whistle-blower laws require plaintiffs to be the “original source” of information in a complaint.

    In a friends-of-the-court brief, provider groups often argue that the 10th Circuit previously accepted too broad a definition of “original source.”

    A clear, consistent and strict ‘original source’ rule could “ward off illegitimate qui tam strike suits,” the AHA and other groups said in an amici brief.

    In addition to the AHA, politically active groups include the Federation of American Hospitals [FAH], Association of American Medical Colleges [AAMC] and American Health Care Association [AHCA].
    -Sharon

    Reference: Mark Taylor, Modern Healthcare 10/17/06

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  4. Ann Miller RN MHA, on December 13, 2011 at 12:21 AM said:

    Medicare Auditors Target Place-of-Service Codes

    Medicare auditors are bearing down on place-of-service errors at the same time that hospitals are spotting POS problems on their own. Mistakes in this area could cause overpayments and jeopardize the status of provider-based entities. Payment accuracy hinges on physicians informing Medicare where they provided the services, which is where POS reporting comes in. Three codes take center stage: POS code 11 (offices), POS code 21 (hospital in-patient departments), and POS code 22 (hospital out-patient departments, such as provider-based entities).

    Using the wrong place-of-service code triggers overpayments because Medicare Part B pays more for certain physician services when they are provided at offices or free-standing clinics rather than at hospital departments, including provider-based entities.

    The reason: professional fees include overhead when services are provided at practices and freestanding clinics. But Medicare Part B reduces professional fees when physicians treat patients in out-patient departments, because hospitals foot the bill for overhead and recover the money through APC payments for facility fees.

    Source: Nina Youngstrom, Report on Medicare Compliance [12/5/11]

    Like

  5. Douglas B. Sherlock CFA, on June 15, 2016 at 8:46 PM said:

    Administrative expenses

    Indeed – Many health plans set a high priority on optimizing their administrative expenses. The competitive environment as well as the Affordable Care Act are likely catalysts.

    Douglas B. Sherlock CFA

    Like

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