Eight Ways Baucus Bill Would Root Out Healthcare Fraud

In the last six months with HealthLeaders Media, I've written and read a fair amount about allegations of fraud and abuse among Medicare and Medicaid providers.

Durable medical equipment charge irregularities, nursing home billing errors, fabrication of services, referral kickbacks, hospital upcoding claims, imaging overcharges, and exaggerations of patient severity are some of the recurring themes found in audits and inspection reports.

The current version of the Senate Finance Committee's America's Healthy Future Act seeks to put a stop to a very large amount of that fraud. The proposal includes 13 pages of measures that will not just recover money after it has been fraudulently billed and erroneously paid out, but would keep scheming crooks from participating in federal programs from the start.

No one really knows the dollar amount in fraud, abuse, or false claims. And no one knows whether stopping all that billing mischief could ever be enough to bend the cost curve. Estimates range from 3% to 10% of healthcare dollars spent, depending on the program and the agency.

But is $500 billion–the amount of fraud, waste, and abuse that some believe can be sliced from federal programs without hurting quality–a realistic number?

There are concerns that if federal agencies go deeper in their effort to find more fraud, they will end up spending a lot more on the effort than it recovers. And what would be the cost of prosecuting these scofflaws, and perhaps putting them in jail for a long time? What's the return on investment for the taxpayer?

The National Health Care Anti-Fraud Association thinks a huge amount of fraudulent spending is there for cost-effective recovery, if not the entire $500 billion, some significant portion of that.

Its executive director, Louis Saccoccio, says that of the $2.26 trillion spent on healthcare, "conservatively" 3% or $68 billion "is lost to fraud." And that's not even considering what might be further categorized as waste or abuse, he says. Just talking fraud, he says, some recovery efforts recapture $17 for every $1 spent.

The federal Office of Inspector General's policy does not give out any such estimates.

However, it does boast successes every year. For the fiscal year ending Sept. 30, 2008, the Department of Justice says it recovered $1.34 billion in fraud and false claims, bringing the total to $21 billion recovered since 1986. An official with the agency, who asked that he not be quoted, said that internally, federal agents believe that's "the tip of the iceberg."

New numbers reflecting fraud and false claim recovery for the 2009 fiscal year will be released next month.

So it's natural that in health reform, a big effort will be made to recover dollars from fraud, waste, and abuse.

In the Senate Finance Committee's America's Healthy Future Act , "Title V – Fraud, Waste and Abuse," the following measures are among those that would tighten control of federal spending and keep crooks from participating in the program from the start.

1. Certain groups of providers and suppliers of healthcare services and goods would be subject to screening measures, such as fingerprinting, criminal background checks, and multistate data base inquiries before being able to bill Medicare. Surety bonds of up to $500,000 may be required. States would be given similar authorities for Medicaid programs. And states that fail to create effective screening programs would have their Federal Medical Assistance Percentage reduced.

2. Current provider databases would be greatly expanded and integrated to allow data sharing between multiple government agencies. The databases would include information on providers' quality of care under managed care, fee for service and waiver programs, Medicaid encounter data, health plan performance, survey and certification, resident or patient neglect or abuse, adverse actions, site visits, penalties and settlements, and results from other program monitoring.

3. Providers working under Medicare Condition of Participation agreements would first have to establish core elements of compliance. Physicians and suppliers would have to keep documentation of referrals to programs at high risk of fraud and abuse, and provide that to officials upon request. Physicians must have a face-to-face encounter with a patient before making a referral for home health or durable medical equipment.

4. The maximum period for submission of Medicare claims would be reduced to 12 months from 36 months for Part A and Part B.

5. Hospitals that fail to report an adverse action affecting physicians' clinical privileges would face civil monetary penalties.

6. Penalties for submitting false claims and for submitting false statements in false claims would be increased, as would penalties for delaying inspections or obstructing program audits. For Medicare Advantage and Part D, penalties would be enhanced for marketing violations, as well as submitting false information.

7. Recovery Audit Contractor programs would be extended to Medicare Parts C and D and Medicaid.

8. The Health Care Fraud and Abuse Control Program, now funded at $376 million, would increase by $10 million each year for 10 years.

If this bill passes as is, providers will have to spend a lot more and use a lot more personnel resources just to qualify for participation in Medicare programs. And once in, they'll have to account for their spending in much more detail.

And there may be push back with political consequences. Says Saccoccio, "There may be a tipping point where if you push too aggressively on fraud, you may get push back: ‘Why are you going after all of us, when there are just a few bad apples out there?"

Only time will tell whether all the extra effort by many honest providers will turn out to be worth it.