Newt’s Reform Ideas – 1b: More on Fraud

The second in a series reviewing the health policy proposals by Newt Gingrich as listed at the Center for Health Information.

 ♦ Part 1: Stop Paying the Crooks

We’ve been looking at the health care reform proposals recently put forth by Newt Gingrich at the Center for Health Information. Before moving on to the topic of computerized medical records, a few more points come to mind regarding the whole fraud and abuse problem and its proposed solution.

The real problem with the federal health care programs, the seed ground for the vast majority of the fraud problems in health care (and elsewhere), is complexity. Simple systems are hard to defraud. When you buy a box of cereal at the store, and pay the checkout gal your money, there’s no opportunity for fraud. If the IRS wanted to eliminate tax fraud, they would deep-six their hundreds of thousands of pages of regulations — which even an army of accountants and lawyers can’t decipher — and have a simple, one page, flat tax form: Here’s what I earned, send the Feds x%. Complexity in any realm — be it software development, business models, government and legislation (e.g. the 1000-page-and-growing health reform legislation being considered by the House, which John Conyers says no one will read, and, hey! no big deal!), vastly increases the opportunity for the dark side of human nature to find loopholes to benefit themselves — and creates deadly traps which even the most honest may be hard-pressed to avoid.

Our current health care reimbursement system is beyond complex — Medicare regulations in the Federal register are 3-4 times the size of the IRS tax code. (Lord knows what they will be if “reform” gets passed!) Chew on that for a moment. Such complexity engenders huge inefficiencies, and contradictory or nonsensical rules can make it all but impossible to comply, or even understand what they mean. They also engender a certain amount of moral hazard, even for the honest.

To wit: a prime example of this in medical coding and reimbursements is something called edits. I’ve explained these before, but in a nutshell they go like this: if certain sets of complex conditions are met, you get paid; if not, then no dice. For example, if you perform surgery A at the same time as surgery B (as they are related), Medicare or an insurance company may refuse to pay for either A or B, as they are bundled — that is, they are considered as one procedure for payment purposes, even though more time and complexity was involved to do both. Often this makes sense (since unbundling components of procedures was sometimes abused by fraudulent providers), but with increasingly frequency the exclusions are arbitrary, and have become vehicles for payers to cut costs by denying payment capriciously. Physicians who, quite legitimately, submit modifier codes (which may allow payment for both, if there is good reason) may also become targets of auditors ever on the search for “fraud,” since such a billing pattern may suggest they are trying to bilk the system.

And then there are the procedure / diagnosis code edits. If you submit a legitimate, medically-indicated service for payment, Medicare or the insurance companies may deny payment if they don’t like the diagnosis code (called ICD-9 codes) you used. Medicare is pretty transparent about which codes they will pay for, while insurance companies often are not (so-called “black-box” edits) — but in both circumstances the decision to pay or not for a given diagnosis is often utterly capricious and not at all medically-based. Savvy physicians and medical billers learn which codes pay, and which don’t — and since there may often be more than one diagnosis which is proper and ethical to use, one may get you paid while another may not. But this insanity also creates a temptation to push the envelope a bit, to receive payment for an entirely legitimate medical service — and yes, one determined to be so under peer-reviewed standards and outcomes research — by using other diagnosis codes which may not be quite as close to the most accurate clinical code. And even if it is entirely legitimate and ethical to change codes, the Feds view this coding-for-reimbursement as fraudulent.

So let’s say your patient has diabetes and high blood pressure. You perform some service to evaluate his high blood pressure. Medicare won’t pay for this service when submitted with the high blood pressure diagnosis code (even though it’s entirely appropriate medically and ethically to perform this service for high blood pressure) — but will pay for it when submitted with a diabetes diagnosis code. Since the service was legitimate and medically appropriate to provide for high blood pressure, and since the patient also has diabetes, you submit the service for payment with the diabetes code — and get paid. (This specific example is entirely fictitious and conjectural, BTW, used only for the sake of demonstration — but such code mismatch problems and incorrect denials are legion in health care billing). Technically, you are committing fraud if you do this; medically, you have done absolutely nothing wrong — the problem lies in the bizarre mismatch of payment edits and the mind-numbing complexity of the payment system. Many physicians play strictly by the rules — and as a result perform a lot of care without pay. Not a great business model by any stretch (since it’s not free to provide the care) — but preferred by many to the dreaded Federal auditor flashing his badge and demanding to see your ID as you check your patient’s prostate.

So the fraud problem is far more than a bunch of shady sheisters shilling the system for big bucks by billing for faux services. It’s also a lot of honest and hard working physicians who are struggling to understand and comply with an enormously complex payment system, fraught with egregious capriciousness which often denies payment for entirely legitimate services. It creates a morally hazardous environment which can easily push physicians into areas of ethical grayness — or worse — when they are arbitrarily denied fair payment for legitimate and medically-appropriate care.

Enough for now on the fraud issue — although I could go on much longer. As long as the payment system remains phenomenally complex, you will have fraud — whether real or simply perceived by payors. And there is no serious consideration in any current proposals to reform this monetary madhouse. You cannot eliminate fraud in such a complex system without turning your medical payment bureaucracy into a police state — and punishing, and driving out even more honest, competent physicians from their profession. Can you say, “Access problems”, boys and girls? But then, if we’re left with no doctors standing, no doubt “fraud” will decrease, substantially.

Anyway, time to move on to part 2, on computerized medical records.

Newt’s Reform Ideas 1 — Stop Paying the Crooks

Over at the Center for Health Information (HT: Hot Air), Newt Gingrich and Nancy Desmond have proposed a series of principles for reforming our health care system, to wit:

1. Stop Paying the Crooks. First, we must dramatically reduce healthcare fraud within our current healthcare system. Outright fraud — criminal activity — accounts for as much as 10 percent of all healthcare spending. That is more than $200 billion every year. Medicare alone could account for as much as $40 billion a year.

2. Move from a Paper-based to an Electronic Health System. As it stands now, it is simply impossible to keep up with fraud in a paper-based system. An electronic system would free tens of billions of dollars to be spent on investing on the kind of modern system that will transform healthcare. In addition, it would dramatically increase our ability to eliminate costly medical errors and to accelerate the adoption of new solutions and breakthroughs.

3. Tax Reform. The savings realized through very deliberately and very systematically eliminating fraud could be used to provide tax incentives and vouchers that would help cover those Americans who currently can \'t afford coverage. In addition, we need to expand tax incentives for insurance provided by small employers and the self-employed. Finally, elimination of capital gains taxes for investments in health-solution companies can greatly impact the creation advancement of new solutions that create better health at lower cost.

4. Create a Health-Based Health System. In essence, we must create a system that focuses on improving individual health. The best way to accomplish this is to find out what solutions are actually working today that save lives and save money and then design public policy to encourage their widespread adoption. For example, according to the Dartmouth Health Atlas, if the 6,000 hospitals in the country provided the same standard of care of the Intermountain or Mayo health clinics, Medicare alone would save 30 percent of total spending every year. We need to make best practices the minimum practice. We need the federal government and other healthcare stakeholders to consistently migrate to best practices that ensure quality, safety and better outcomes.

5. Reform Our Health Justice System. Currently, the U.S. civil justice system is the most expensive in the world — about double the average cost in virtually every other industrialized nation. But for all of the money spent, our civil justice system neither effectively compensates persons injured from medical negligence nor encourages the elimination of medical errors. Because physicians fear malpractice suits, defensive medicine (redundant, wasteful treatment designed to avoid lawsuits, not treat the patient) has become pervasive. CHT is developing a number of bold health-justice reforms including a “safe harbor” for physicians who followed clinical best practices in the treatment of a patient. Visit CHT’s Health Justice project page to learn more.

6. Invest in Scientific Research and Breakthroughs. We must accelerate and focus national efforts, re-engineer care delivery, and ultimately prevent diseases such as Alzheimer’s Disease and diabetes which are financially crippling our healthcare system.

My first reaction to this? Meh. Obamacare light.

On deeper reflection, however: Mini-meh. Not entirely without merit, but loaded with silliness and false assumptions.

What is it with these so-called policy gurus? Knowing little or nothing about how health care really works, they haul out the bromides and throw around statistics based on taking small numbers and projecting them across large populations, to come up with scary percentages which then echo around the web and inside the hollow heads of the parrots in media newsrooms. Oh, and our politicians then use this crapola to formulate policies, which always end up having massive unintended consequences and which never achieve the results promised. Newt’s a pretty bright guy — generally a far better idea man than a politician — but he’s whiffing at softballs thrown slowly, by and large, with this one.

So what’s my gripe? Where do I begin? How about at the beginning?

 ♦ Stop Paying the Crooks: Of course, brain-dead easy. Just find ’em and lock ’em up. Problem solved; billions saved; next problem!

Not quite so easy, in reality.

Look, fraud exists in Federal programs; it may actually be a pretty large chunk of change, although I’m more than a bit skeptical of the numbers being tossed around. Why? Well, first, if we knew exactly how much fraud there was in Federal health programs, we would, you know, go after it, no? All these numbers are nothing but projections — and projections based rather thinly on hard data, then amplified by applying them to large populations. Great for media play and making a political point, but invariably far, far off the mark.

Ever hear those public service ads which generate guilt by saying “One in five kids will go to bed hungry tonight in America.” Believe them? Of course not — they’re ludicrous on their face (unless you count the corpulent kids whose last Big Mac was 2 hours before bedtime…) . The gimmick used is non-representative sampling — and sampling is a huge problem: if 2% of physicians are found fraudulent in Miami, does that mean 2% are crooks in Topeka, or Flagstaff, or East Podunk? Highly unlikely — but that’s how these estimates are typically generated. So the line goes, “Eliminate fraud and we can have XX billion dollars to spend on such-and-such!” End result? There’s never as much fraud as you say (and a good deal of it is impossible to track down), and the promised billions never materialize.

Next problem is definitions: to paraphrase Bill Clinton, it depends on what the meaning of “is”, is — how exactly are you defining fraud?

Sure, no one argues with the dude who steals or fabricates a provider number, then bills Medicare for millions of dollars of non-existent medical services (although it is surprising how long it takes Medicare to catch on to such schemes). Some are almost as clever as politicians at stealing money. Bust ’em, lock ’em up, problem solved.

But what about the honest doc utterly befuddled, or too busy to spend half her time on, the mind-boggling complexity of medical service coding? Or the solo practitioner who can’t afford the huge hassle and administrative costs and burdens of a full-fledged compliance program? In the world of Medicare & Medicaid, such providers are also fraudulent. Try to be charitable to a poor Medicare patient and not bill them for their copay and deductible?

Fraud! Honest to God.

When physicians hear about new measures to stamp out fraud and abuse, they know exactly what that means: federal auditors, not health care professionals but bureaucrats, with infinitely deep pockets and unlimited time, sweeping into a busy medical practice, demanding hundreds of charts to review, disputing countless interpretations of complex, confusing, vague, and often contradictory regulations on what code should have been charged for such-and-such a service, with mind-boggling penalties per offense, no matter how trivial. Be prepared for a 6-figure attorney bill, on your dime, with little or no formal avenue for review or appeal — and still expect to settle in the end, hopefully for less than a mil.

Oh, and that settlement will become part of the national fraud statistics, finding some convenient multiplier, and generate some more truly shocking numbers about crooked doctors — when the chances are rather high in reality that that no real fraud occurred.

There is a pretty simple way to vastly reduce such fraud, of course: pay physicians by time, like virtually every other profession. Kill the complex coding system which by its very complexity breeds fraud, error, and confusion.

Will it ever happen? When Skip Gates dons a white hooded cape and burns crosses on lawns.

Human nature being what it is, you will never completely eliminate fraud. But you sure can crush a profession by trying.

There’s lots more to come, not all critical. Next post: Newt Part II: Move from a Paper-based to an Electronic Health System.

Back soon.