Washington Beat

September 20, 1999

Legislation; Medicare; Fraud'N'Abuse

Washington Beat

Jump to:Choose article section...Legislation: Bill Thomas, the anti-StarkMedicare: The annual revision of physician feesFraud 'n abuse: Medicare's finest? Well, not really

By Michael Pretzer, Washington Editor

Legislation:
Bill Thomas, the anti-Stark

A chorus of praise went out from physicians the moment Rep. Bill Thomas(R-CA), chairman of the House Ways and Means Committee's subcommittee onhealth, introduced legislation to soften the self-referral laws known asStark I and II.

His bill--the Physician Self-Referral Amendments of 1999--will "correctlongstanding concerns of medical group practices regarding the applicationof an unworkable law," says Audrey Nelson, a Mayo Clinic rheumatologistand past chair of the American Medical Group Association.

The most convoluted, confusing, and wide-ranging aspect of the Starklaws is the prohibition against making referrals for certain services toan organization in which the referring physician has ownership, an investment,or some compensation arrangement. Few physicians oppose the restrictionsbased on ownership and investment, but the compensation element has receivedlots of objection--and ridicule--over the years. It has been made more vexingby Congress, which has legislated many exceptions to that aspect of therule. "The complexity and ambiguity create great expense and uncertaintyfor legitimate group practices," says Nelson.

Thomas' bill would eliminate all restrictions based on compensation arrangements.

Another troubling part of Stark is the requirement that physicians must"directly supervise" ancillary services provided by nonphysicians.Under Stark, a doctor has to be on the scene nearly all the time.

Thomas would change the requirement to a more lax "general supervision."

AMGA and the Medical Group Management Association have long lobbied forchanges to Stark. But they still have a way to go. The Thomas bill isn'tlaw yet. The two associations are optimistic, however, that Congress willact this fall.

And they're pleased with what Thomas has writ. His amendments will "removebarriers to integration and innovation, while still maintaining the originalintent of the laws," say the two organizations.

But Rep. Pete Stark (D-CA), the sire of Stark I and II, couldn't agreeless. "The Thomas bill will return us to the days of massive patientabuse by unscrupulous doctors," he says. "It will cost Medicarehundreds of millions of dollars in increased testing, and it will destroytrust between patients and doctors. Repeal of the compensation provisionsis a loophole you could drive an armored division through."

Medicare:
The annual revision of physician fees

It's time again for the Health Care Financing Administration to futzwith Medicare's physician fee schedule. You'll recall that your fees arebased on the value of work required to provide a service, the related practiceexpenses, and the cost of malpractice insurance. Over the next few years,the formulas for calculating two of the components--practice expenses andliability coverage--will change. Though not everything is final yet, HCFAhas made its intentions known:

Malpractice insurance. For the first time, this component willbe resource-based--that is, derived from compilations of actual insurancepremiums. To do the resource-basing, HCFA used complex calculations thatfew human beings would care to understand, then it gave the numbers an extrashake so they'd come out "budget neutral." (By law, the new wayof calculating compensation for malpractice insurance can't be more costlythan the old way.)

Thanks to the new resource-basing, some types of medical practice willsee fees increase next year, while others will see them decrease. HCFA projectsthe biggest gains will be made by emergency medicine (2.7 percent) and nephrology(1.3 percent). Family practice (0.5 percent) and internal medicine (0.4percent) will also come out okay. The biggest losers will be cardiac andorthopedic surgery (both at -1.0 percent).

In most cases, what's involved is little more than pocket money. Accordingto the American Academy of Family Physicians, the average FP nets $29,500a year in Medicare revenue. Resource-basing the malpractice insurance componentwill raise this total by less than $150.

Practice expenses. The phasing-in of resource-based practice expenses(RBPE) began this year with 25 percent of the component resource-based,75 percent charge-based (the old system). Next year, the mix will be 50-50;in 2001, 75-25; and in 2002, 100 percent, nirvana. "Breaking the linkbetween practice expense payments and historical charges will create a fairerpayment system," promises Michael Hash, HCFA's deputy administrator.

As happened this year, 2000 will bring a little pleasure to physicianswho provide services primarily in office settings and a little pain to thosewho work mostly in hospitals. According to HCFA, family practice and ob/gynare slated for a 1 percent increase. Cardiac surgery and anesthesiologywill take a 4 percent loss, and thoracic surgery will drop 3 percent.

HCFA continues to adjust its procedures as it phases in RBPEs, and somespecialists aren't going to be pleased with one of next year's refinements.The agency will stop considering the services performed by a physician'sstaff on hospital patients to be the doctor's practice expense. BecauseMedicare pays the hospital for most of those services, argues HCFA, to compensatethe physician would be to pay twice for the same thing. Normally, physiciansuse the hospital's staff rather than their own, the agency adds.

Fraud 'n abuse:
Medicare's finest? Well, not really

Those claims-processing contractors hired by the government to keep doctorsfrom perpetrating fraud, abuse, and other mischief are effectively Medicare'spolice force. You wouldn't think they'd be dirty cops. Or would you? Since1990, nearly one in every four claims contractors has had "integrityproblems," the General Accounting Office says.

According to two recent GAO reports, HCFA has received more than $235million in criminal and civil settlements from six contractors during thepast six years. What's more, seven of the current 58 Medicare contractorsare under investigation. A fine show by what the government bills as the"front line of defense against provider fraud, abuse, and erroneousMedicare payments."

Contractors' fraudulent and wasteful actions include:

  • Destroying and deleting claims.
  • Falsifying records submitted to HCFA.
  • Altering files and documents that would cast doubt on their own performance.
  • Failing to chase after overpayments to providers.
  • Making costly mistakes in screening, processing, and paying claims.

Two contractors have been hit with criminal as well as civil penalties.Last year, BCBS of Illinois pleaded guilty to conspiring and endeavoringto obstruct a federal audit and making false statements; it was fined $4million for its criminal conduct. In 1996, Blue Shield of California pleadedguilty to conspiring and endeavoring to obstruct a federal audit; it wasfined $1.5 million.

GAO gives no credit to HCFA for nabbing the contractors--nor does itoffer hope that the agency will catch others in the near future. HCFA istoo disorganized, inept, and complacent. (Nancy-Ann DeParle, HCFA's administrator,says the agency has taken a number of steps to police its own cops, butthat it needs Congress to legislate "more contracting flexibility.")

Among HCFA's faux pas:

  • Warning a contractor when a review was going to occur.
  • Relying on copies of documents (not originals) provided by a contractor.
  • Letting reviewers become chummy with a contractor's personnel.
  • Depending too much on a contractor's internal quality controls.

If HCFA isn't catching the thieves, who is? Whistleblowers, mostly. Employeesand former employees who couldn't abide the deceit that is said to be "away of life" for certain contractors. Honest people. Some of them couldbe your patients.



Michael Pretzer. Washington Beat.

Medical Economics

1999;18:36.