This is a part of an ongoing series on medical coding, billing, and reimbursement.

Previous posts are here:

• Part 1–Intro & Procedural Coding
• Part 2–E&M Coding
• Part 3–ICD-9 (Diagnosis) Coding
• Part 4–Federal Compliance Programs
• Part 5–Federal Compliance Penalties
• Part 6–Managed Care
• Part 7–Is There an Exit? – Part I

In my previous post, I suggested that there may be simpler, more effective ways to manage reimbursement in health care. Clearly, the current system is broken. Health care costs have been spiraling despite aggressive attempts by insurance carriers to control them, using coercive methods of regulation and market dominance, and neither managed-care nor burgeoning federal regulation has succeeded in bringing them under control. These measures have only succeeded in vastly increasing the complexity and resources required to provide health care. Physicians are under growing pressures of both time and energy to meet the extraordinary paperwork load and time requirements to master and comply with this excessive regulatory environment.

In arriving at some potential solutions to this growing crisis, I have attempted to go back to core principles based on an understanding of human nature and motivation, striving for three major goals: simplicity, transparency, and accountability. I am under no illusion that such changes in our massive, complex, and politically-charged system will be easy to implement. Nevertheless, it is time to begin rethinking our entire system, before its problems become so burdensome that the quality of our health care delivery deteriorates drastically. Whether the political and social will exist to make such drastic changes is, of course, a very open question.

We are currently expending a huge amount of resources simply sustaining the current system, which are therefore not available for the actual provision of health care. Hence we have health care costs taking an increasingly large percentage of the federal budget; health insurance premiums eroding employee earnings and employer profits; and decreasing access of patients to physicians due to financially unsustainable entitlement programs which no longer cover even the cost of providing care. The rapid-fire nature of our information-based society, with media and Internet, has tended to create an endless series of daily crises, many of which prove to be nonexistent over time. Meanwhile, under the radar, the health-care morass continues to grow into a gargantuan issue, with little fresh thinking, and little media attention given the magnitude of the problem and its potential to impact all of our lives.

I hope to put forward here a few simple ideas. I make no claim to any expertise in the area of health care policy, other than nearly 30 years of day-to-day patient care, with the resulting cumulative experience in a system which is rapidly becoming unworkable. Our health care system is extraordinarily complex, and I am not naive enough to believe that such simple ideas will solve every problem which its complexity and scope presents. Nevertheless, I believe that by applying core principles, rather than continuing on present flawed assumptions, the potential for genuinely profound changes in our health care delivery system is substantial.

Here are some proposals for reforming the health-care system.

♦ Pay physicians by time: In virtually every profession and avocation, including law, accounting, consulting, and most trades, the primary measure of one’s efforts is the time spent performing the task at which you are trained and skilled. The hourly rate will, of course, vary widely based on your profession, training, and expertise; but, by and large, the time you spend on a task is well-correlated with its economic value.

The exception to this, as I have pointed out in lurid detail in previous posts, is the health-care profession. We have evolved an extraordinarily complex system of service codes, diagnosis codes, and business rules and regulations which have become so convoluted and contradictory that virtually no one can master them. We hire additional employees, requiring specialized training, in an attempt to delegate much of these efforts, with only marginal success, as the rules are both constantly changing, and vary widely from one insurance carrier to another, one federal health-care program to the next. As a result, much effort and many resources are expended in simply getting properly and fairly reimbursed for one’s services and expertise. A physician who must expend substantial time and energy, and squander substantial business overhead, managing such a system is obviously no longer solely focused on the provision of his primary skill, the practice of medicine.

Paying physicians solely by time spent would, I believe, drastically alter this equation, and significantly change motivation and incentives to be more in line with what both physicians and patients seek. If you examine any study on patient’s complaints about the health-care system, you’ll find at the top of nearly every list of complaints two issues: physicians do not spend enough time with their patients, and patients have to wait too long to see the doctor. Of course, some of these complaints arise from physician personality problems or practice management issues–but in no small part, they arise from the perverse incentives and necessities generated by our current system. Since physicians are paid per unit service, it is in their best interest financially–and increasingly a financial necessity–to see as many patients as possible in order to generate sufficient revenue to sustain their increasingly costly medical practices. The high overhead thus required by extra employees and employee benefits, dictation costs, the overall rise in medical practice expenses and malpractice premiums, require that physicians often see as many patients as possible–thus resulting in over-scheduling and rushed visits.

Imagine how transformative it might be to simply pay the physician based on the time he spends with the patient. The incentives are suddenly flipped: the physician is now motivated to spend more time with you, since time is money. There’s no need to cram a high volume of services into one’s day to make ends meet, since you will be paid simply based on the time you have spent with patients–whether they be few or many. Practice overhead would drop drastically, as the need for highly-trained medical billers would disappear. Time is a very simple parameter to measure, and easily understood by both patients, physicians, and staff, reducing much of the confusion which now exists with our existing service code-based structure.

Paying physicians by time is not without challenges, obviously. Unlike legal or accounting services, for example, there are significant differences in the types of services provided by physicians to patients. Physicians may be engaged primarily in interacting with their patients in an office setting; in a hospital or intensive care unit; in surgery; performing procedures. While one might hope for a fixed hourly rate, for example, established by negotiation with an insurance carrier (more on this later) or set by the physicians themselves, different hourly rates for different broad categories of services may prove necessary. While time is in general an excellent indicator of complexity of service, there are circumstances in which time alone does not entirely reflect accurately on skill or expertise. For example, an inexperienced surgeon will likely take significantly longer on a given surgery than one who has many years of experience, since acquired surgical skills make for greater efficiency. Ultimately this may be solved by a system where more experienced physicians, or those with demonstrated efficiency and competency, recoup a better hourly rate. This would be consistent with other professions, where reputation, experience and expertise in given areas command higher hourly pay.

Some areas of medicine are not amenable to a time-based payment system: laboratory work, for example, and certain minor procedures. These might be better suited for alternative means of payment based on units rather than time. But a major move away from paying for most medical services based on multi-level service codes is highly desirable.

Time-based reimbursement would, with a single stroke, eliminate our inscrutable system of procedural and diagnosis codes, which are all but impossible to master, and which suck up extraordinary resources. If implemented fully, it is virtually certain that overall costs for medical care would decrease, as physicians would be able to significantly reduce their overhead, and therefore charge less to make a comparable income. Expensive electronic medical record systems (now touted as the savior of our health-care system, which they most certainly will not be) would no longer be mandatory, except as a convenience for documentation. Their current function is primarily that of automating complex coding rules and thereby keeping physicians one step ahead of federal and insurance auditors. Time is an extremely easy quantity to audit, and documentation could be reduced to core essentials, rather than pages of needless detail written simply to satisfy federal guidelines and insurance carrier requirements. Time is also an extremely easy parameter for patients to grasp: the doctor who bills a one-hour visit, when he only saw you for 15 minutes, is easily reported for dishonesty, whereas under the current system it is impossible for patients to assess whether their service coding is appropriate for their visit or not.

Time-based reimbursement would also provide an immediate reduction in the need for large federal and insurance bureaucracies, which exist now primarily to assess, review, monitor, and expedite reimbursement in our current labyrinthine system. Don’t be surprised, however, if such proposals would be vigorously opposed, especially by the insurance industry, which uses the complexity of the current system to reap bodacious profits. Complexity is bad for our health and bad for our economics–but is highly profitable for certain segments of the health-care economy, who by sheer size, market dominance, and massive resources have learned how to turn garbage into gold.

And this brings us to the second component of payment reform, which is health-care insurance:

♦ Dismantle the dysfunctional relationship between health-care payers and health-care providers: This one is going to ruffle some feathers. The current private health-care insurance industry makes huge profits by acting as the middleman between the patient and provider. They use the complexity of the system to deny payments for legitimate medical services, to reduce reimbursement to physicians, while raising premiums purportedly justified by climbing health-care costs. The insurance industry as it now exists represents a huge bureaucratic black hole, which sucks in massive amounts of health-care dollars in administration and profits for the company and their CEOs. An obscene percentage of health care dollars is now spent feeding this beast; it’s time to slay the dragon.

Here’s how I would structure the insurance industry to restore some sanity: I would mandate that universal catastrophic coverage be required for all, with very large deductibles, perhaps $25,000. While I am not generally a fan of mandates, the current formidable percentage of uninsured represents a huge tax on those who do carry insurance. In Washington state, for example, I cannot drive a car without car insurance; I cannot get a mortgage on my house without homeowners insurance. The reason for these requirements is simple: if disaster strikes, and I am uninsured, someone else has to foot the bill. Universal, catastrophic coverage, being broadly-based, would be relatively inexpensive; those who are unable to afford it could be subsidized through state or federal programs, via a system far simpler than our current Medicare or Medicaid eligibility system. Of course, this would involve means testing–which is the only rational way of providing federal subsidies to the poor and elderly, but anathema to the socialists in our midst. Relatively few people would be financially devastated by a loss of $25,000 for a major illness (although it would certainly be a financial strain for many), and therefore catastrophic coverage would protect against such a financial disaster–which often results in bankruptcy.

To cover this large deductible, secondary policies would be available, paid either by individuals or their employers. However these plans would not make payments to physicians; they would reimburse patients for their health care costs. The patients themselves would be the contact point for payment; they would be the ones who actually pay the physician’s bill. This was the original concept in health insurance, and it has many advantages.

First of all, there is simplicity: the patient pays the physician’s bill, submits the claim, and is reimbursed for all, or a portion, of their health-care expenses. The physician gets paid up front, which reduces his overhead, and allows him or her to charge lower fees; the patient knows exactly what his health-care costs are at the point of service. This provides accountability with the physician as well, who must explain to the patient why their fees are so high.

The patient and the insurance company then become direct, accountable business partners; when the insurance company refuses to pay their claim, it is the person paying the premium who knows about it immediately, who can then complain or seek redress directly with the insurance company. No more letters to patients about physicians providing “medically unnecessary” care; no more convoluted denials based on blackbox coding edits; no more long delays as the insurance company stalls payment, knowing that the physician’s practice is overwhelmed with countless other claims denials and may just write it off.

When the patient is denied reimbursement for their care, they will demand to know why, and if unsatisfied, will find another insurance carrier for their health-care coverage. Accountability and transparency are built into the system. Insurance companies would soon be out of the business of dictating which medical services are appropriate, and which are not–a role which has never been appropriate for a third-party insurer. Furthermore, this system would allow physicians flexibility to provide reduced fee or charity care for the needy, without the risk of becoming ensnared in federal fraud regulations or insurance contractual violations. Amazingly enough, if I choose to forgo a co-payment or deductible for a poor Medicare patient, I am guilty of fraud. That’s how perverse our current system has become. Want to accept a gift, or food, or a bottle of homemade wine for your services instead of cash? Fraud under the current system, but ennobling and satisfying for both patient and physician under this reform.

Lastly, in this system reform, I would

♦ Provide tax credits for physicians to see the poor. I have written about this previously. The number of uninsured individuals in our country is large and growing, and represents a genuine scandal for such a wealthy nation. The current Medicaid system is degrading for the individual who needs it, and is onerous and punitive for physicians who choose to accept their payments. For many–especially since the reform of the Medicaid system–such coverage is not even available as an option. Hence the uninsured pour into emergency rooms (where legally they cannot be turned away), where they receive expensive care without emphasis on prevention or adequate maintenance or follow-up.

The institution of tax credits–not deductions–would provide physicians with an immediate incentive to see the poor. It need not be on a dollar-for-dollar basis; there could also be a cap on this credit per year. In Washington state, over 50% of physicians no longer see Medicaid patients–not because they have a desire to deny care to these individuals, but because reimbursement rates are so low they no longer cover expenses, and because the system is punitive, bureaucratic, arbitrary, and complex. As a result, many Medicaid patients find it nearly impossible to find even primary care physicians who will see them, much less specialists. Medicare is not far behind in this shameful dereliction of responsibility. By providing tax credits to care for those who cannot afford insurance, physicians would have a direct financial incentive to see the poor, and the massive bureaucratic administration now managing Medicaid health-care payments would become obsolete overnight. The money saved by such bureaucratic reduction would go a long way toward subsidizing universal catastrophic coverage or meeting non-medical programs such as job training and housing.

There are, no doubt, many challenges with such a simplified approach to health care reimbursement: our health-care system is expensive, very complex, and many players have a vested interest in the system as it now stands. But for those of us on the front lines–physicians, other health-care providers, and patients–drastic changes must begin, lest our system implode under its own weight. The hurdles to change are far less conceptual and practical than political: one can only begin to imagine the heated rhetoric about greedy doctors, charges of abandoning the poor, and other verbal invectives which have become the currency of our dark political age. However, if we do not begin to move away from our current system, and demand that those whom we elect bring about such radical changes, we will have no one but ourselves to blame when the gleaming luxury liner of our health-care system runs aground on the jagged rocks of reality.

This is a part of an ongoing series on medical coding, billing, and reimbursement.

Previous posts are here:

• Part 1–Intro & Procedural Coding
• Part 2–E&M Coding
• Part 3–ICD-9 (Diagnosis) Coding
• Part 4–Federal Compliance Programs
• Part 5–Federal Compliance Penalties
• Part 6–Managed Care

What started off in concept as a few posts on some of the craziness in the medical billing and reimbursement arena has been turning into something of an opus magnum on the subject–yet surprisingly, even at that has not even touched upon all of the complexity or contradictions inherent in this maze of regulations, bureaucracy, and inefficiency which we call our health care system. Such systems–complex, increasingly unworkable and counter-productive–do not arise by design, but rather by a sort of perverse evolution, growing a brier here and a bramble there, creeping tentacles and spiraling vines sprouting to address difficult problems, but increasingly choking the life out of their intended benefactors, strangling both those in need of help and those committed to providing it.

A regular question in comments throughout this series has been, “What, then, are your solutions?” Fair enough question–it is far too easy to dissect and depreciate the medical system we have at once inherited and created: it is, in soldiers’ parlance, a “target-rich environment.” A house built on sand cannot stand — and the mansion of American medicine, still rich in grand gables and ornate glass, is sagging from a rotting foundation, swaybacked from footings set on unsteady soil. The termites eroding its timbers are many, rooted in men’s souls as much as in Senate halls. We demand the finest care for ourselves, sparing no expense to others. We demand perfection of those capable only of imperfection. We hide behind our terror of death, unspoken yet unrelenting, seeking false hope in technology and technique against that dark looming fortress which stands unbending against our extravagant but ultimately fruitless endeavors. We pass law upon law and regulation upon regulation, engorging a byzantine monster so immense it can no longer ambulate–yet still we feed the beast, hoping against hope it may someday become the chrysalis which will carry us to a better world. It will not, and can not, for it has not the wherewithal to do that which is most needed: its own dismantling.

The complexity of our current system is both the cause and the result of its dysfunctionality. We have created an environment of perverse motivation and punitive legalism. Patients are shielded from the true costs of their decisions by insurance rendered nearly free to them by their employers or the government. Physicians, seeing their medical decisions challenged and checkmated by capricious clerks and aggressive algorithms, work the complex system to outmaneuver its clear intent to squeeze more work from them for less pay, while their patients are denied the care they have recommended. Insurers, pressured by employers to cut spiralling premiums, make cold calculations from afar which infuriate physicians and injure patients. Attorneys play Monday-morning quarterback, second-guessing complex decisions years after the fact, before gullible juries with Jerry Springer ethics, reaping personal windfalls far exceeding the benefits of their wounded plaintiffs. And government, having opened the financial floodgates of health care entitlements, now seeks to stem the rising waters by sandbagging the banks rather than repairing the dam.

Each player in this dysfunctional drama plays their part, driven in no small part by incentives which drive up costs and increase inefficiency and complexity. Health insurance, while necessary to avoid financial disaster in a health crisis, serves also to buffer patients from the cost implications of their health care decisions. Costly and sometimes unnecessary tests, drugs, or treatments are demanded because “insurance pays for them”–and because media and internet hype inflate their usefulness while minimizing their risks and costs. End-of-life care is extraordinarily expensive in part because patients and families refuse to accept the inevitability of death. Physicians play along, fearing lawsuits if they do not–while themselves refusing to recognize their own impotence against death and the futility of their own technological railings against the darkness. Government, desperately trying to reign in rampaging health care costs, responds by increasing regulation and complexity while decreasing reimbursements–greatly escalating pressure on physicians to manipulate the complex rules for their patient’s welfare and their own financial survival–and compounding the risk that by doing so they will run afoul of its legal and ethical clutches.

To restore a measure of sanity to this system we must return to core principles and truths, long since lost in the maze of regulations and rules we have allowed our health care system to become. In attempting to arrive at a better way to deliver health care, it may be best to start first with doesn’t work–and why:

 ♦ Managed care: Managed care works–or at least it used to–as long as you defined its success as the reduction of health care costs. Managed care uses several models. Most involve the use of a gatekeeper–a primary care provider who is the übermeister of who, when, and where you as a patient get care. Need a specialist? No go, unless Herr Pförtner approves. Got to see that specialist (finally), who recommends you have an MRI or CT scan? Gotta get a piece of paper from the Gatemeister before you go. And in many arrangements, the primary care gatekeeper has strong financial incentives to Just Say No–or strong disincentives should he break down and say Yes. So for you to see that specialist, your family doctor has to: 1) do extra work, filling out and sending more paperwork and forms, and 2) lose money. Bet he or she finds some way to treat you without that visit or test. Even good, ethical doctors get beaten down by such a system.

Another variation on managed care makes the insurance carrier the gatekeeper, making decisions about what care you may have, under what conditions, by which doctors. If you like having your primary care physician giving a thumbs up or down on your tests and referrals, you’ll just love having this process run by insurance clerks, secret policies, and computer algorithms. Of course, the carriers constantly remind us they don’t practice medicine. They’re right, of course: no one would call making regular decisions about your access to referrals, tests, and medications purely for financial gain practicing medicine, no siree. Malpractice of medicine would be a better description.

Managed care saves money by restricting access to care–and hence it resulted, after its introduction, in a significant drop in health care costs. But patients got wise to the game, and became more demanding–and media stories about kids denied cancer treatment and women with breast cancer denied bone marrow transplants, made the managed care companies pariahs. And so, managed care was forced to become more flexible, allowing more specialty visits and looser restrictions on certain tests and procedures. The result? The savings melted away, and after several years of declining costs, premiums and costs for managed care are on the rise–at about the same rate as health care costs across the board.

 ♦ More regulations and harsher penalties for their violation: So here’s the plan: Medicare costing taxpayers tons of money, having covered all those eligible regardless of ability to afford care and opened the entitlement floodgates? Time to micromanage where all that money goes. Create highly complex rules about what services can be provided, under what circumstances, and then change them constantly based not on medical need or progress but simply to stem high cost areas. Make the rules so complex no one can understand them–then go after the bastards who are “cheating” the system by violating the rules. Well, fear works–up to a point. Most doctors will try to ignore the rules and simply code at lower service levels to minimize their risks and the time needed to master the maze; others will buckle down and try to master them. Then, when even this doesn’t work to stem costs, it’s time to lower reimbursement levels. Eventually, this brilliant plan–increasing the costs of providing care while paying less–will result in payments which fall below the costs of providing the care–and doctors either have to game the system to stay afloat, or stop seeing federally-insured patients. The end result: more “fraud”–and rapidly shrinking health care access for covered patients (the elderly, disabled and the poor). Brilliant theory, Einstein. Got any more like that?

 ♦ Paying for quality: This is one of the latest gimmicks the health care policy wonks have dreamed up, more commonly known as pay for performance. It’s based on the (highly disputable) notion that bad doctors are running up the cost of care by ordering unnecessary tests, recommending unneeded procedures and surgery, practicing costly medicine which lies outside the mainstream–renegades all, ransacking the health care treasury. The good guys in the white hats, on the other hand, walk carefully between the lines, following established standards of care, don’t cost the system nearly as much–and should be rewarded with better reimbursements.

Ten solid seconds of thought by anyone with an IQ over 50 should see problems with this idea. A superbly-trained physician saving the life of a desperately ill patient, on a ventilator in an ICU, will be spending a whole pile of money–whereas ol’ Doctor Feelgood, passing out antibiotics for your sniffles and pain pills like candy may not be spending many health care dollars at all. High quality — while not invariably more expensive–is often so. And what about those guidelines? Well, one problem is, by and large, they don’t exist — except in a few relatively straightforward areas of medicine. The reason, in no small part, is that quality medical care is a complex and constantly moving target: what was excellent care ten years ago may be marginal or even poor care today. Once you ossify guidelines into regulations governing payment, you run a great risk of freezing health care advancement. You will be paid for care meeting the guidelines–but not for better care, based on advances in medical knowledge and technology, which will tend to fall outside the guidelines. And any physician who thinks they’ll get paid more for following the guidelines needs a long session on Dr. Sanity’s couch: they will pay those physicians not meeting the guidelines a lot less, and the “good guys” better than them — but still less.

I could continue, but enough of bad ideas. More of the same is not the answer to our health care system. In my next post I hope to lay out a few ideas which are based, I believe, more solidly on reducing complexity and aligning our health care more solidly along the lines of simplicity, accountability, and transparency. Stay tuned, back soon.

This is a continuation of a series on medical coding, billing, and reimbursement.

Previous posts are here:

• Part 1–Intro & Procedural Coding
• Part 2–E&M Coding
• Part 3–ICD-9 (Diagnosis) Coding
• Part 4–Federal Compliance Programs
• Part 5–Federal Compliance Penalties

 
OK, I have a business deal to offer you:

STRICTLY CONFIDENTIAL

PROPOSAL FOR URGENT BUSINESS ASSISTANCE.

With due regards, I take the liberty to contact you for an urgent business transaction which will be of immense benefit to all parties concerned. I am Mr Kingsley Chiugo, the Chairman of the contract Tenders Board of Nigeria National Petroleum Corporation, (NNPC).

My committee has the responsibility for the recommendation and award of contracts and supplies for the NNPC. In the course of our assignment, we did over-inflate the contracts for some supplies to the NNPC as a result of which the sum of USD $25.8m (Twenty five million, Eight Hundred Thousand United States Dollars only) is now outstanding. The original contractors who executed the jobs have since been fully paid off, leaving this outstanding sum. Unfortunately, we as civil servants are not allowed to own or operate a foreign account and it is also not possible for us to withdraw the money here locally.

We therefore need your kind assistance to transfer this outstanding sum of USD $25.8m to your account anywhere very safe. We shall compensate you with 25% of the funds for your assistance after the transfer. We the officials here shall have 65% while 10% will be set aside for any incidental expenses.

Oh, wait–you know about that one, and you’re not interested… OK, so here’s another–and this one’s for real:

STRICTLY CONFIDENTIAL

PROPOSAL FOR URGENT BUSINESS ASSISTANCE.

I have an urgent business transaction which will be of immense benefit to one party involved. I wish to contract with your medical practice to provide services for my clients, who pay me handsomely for insurance policies we tender for their health care. We have over-inflated these contracts, and need your kind assistance to increase our already immense profitability. The terms, I am confident, you will find to be most agreeable:

• We will not disclose the amount which you will be paid for your services to our clients.
• When we pay you for services, we will do so on our own timetable, delaying as long as possible to maximize our revenues.
• When you provide more than one service at a time to our clients, we will bundle them together into a single service which pays less.
• We will not disclose to you why we have refused to pay for such services.
• We will not abide by the federal rules dictating under what circumstances (such diagnosis, edits, and multiple services) you will be paid.
• We will not disclose the internal rules which we use to make exceptions to these federal regulations.
• We reserve the right to change your submitted invoices, substituting other, less costly services for those which you have submitted to us.

You need to send us urgently the particulars of your practice or company bank account from which your funds will be removed (please do not expect any funds to be deposited). As soon as we receive this, we shall commence the process and it is expected to take 50 working days for the complete transfer to be effected. Of course, confidentiality is important in a matter as sensitive as this one. Send your response to my e-mail address above and include your private tel/fax number for ease of communication.

Yours sincerely,

Kingsley Chiugo, Managed Care Inc. CEO

Now if an e-mail like this arrived in your in-box, you’d hit delete faster than a Kung Fu fighter kicks your lights out. But out here in the health care world, this scam isn’t a sucker’s come-on–it’s the normal course of business between health care providers and health insurance carriers who pay them. Welcome to the wacky world of health insurance reimbursements.

Whoa, Nellie!! you say–surely no sane businessman or doctor with an IQ above room temperature would fall for such an offer? Yup, we docs do, all the time–in fact, there’s little choice in the matter. So how did we get into this mess?

Back in the old days, when men were men and doctors took care of patients, life was pretty simple: you saw the doctor, he charged you a (usually small) fee, you paid his bill, and submitted the claim to your insurance company, who reimbursed you for it in whole or part. Then, due to rising health care costs from a host of factors–more expensive technology and drugs, the introduction of federal health insurance with increased access, an aging population–and yes, over-utilization by physicians (for many reasons: greed, defensive medicine against lawsuits, easy availability of expensive technologies), etc., we stumbled upon the idea of managed care: the insurance company would contract with the physician, and pay them directly, monitoring and controlling their utilization of expensive health services while fixing their reimbursement rates contractually. So why would any sane physician sign up for this? Because an increasing high percentage of patients were covered under such plans, and had strong financial incentives to see only such contracted physicians. So Miss Demeanor might see grumpy, marginally-competent Dr. Jones, a provider in the insurance network, and get reimbursed for 90% of her bill–or see that very nice Dr. Smith–he’s cute and very smart, you know–but sadly, out of network, and get reimbursed for 40 or 60% of the care. Guess who she’ll see? Nice ol’ Smitty gonna be sittin’ in his office wondering where all his loyal, admiring patients went.

As these large insurance networks became dominant–driven by their lower health insurance premiums for managed care–large numbers of patients made choices about their health care based on their insurance coverage (generally employer-dictated, and therefore chosen by price, not service) rather than by personal preference–and a large insurance company could bankrupt a medical practice by cutting them out of a network. As the smaller insurers dropped out of markets due to the economics, it became common for a big player to insure 20, 30, 40%–or more–of a practice’s patient base. This kind of market dominance left physicians with little choice but to sign up with managed care plans with godawful contracts. And of course, physicians were prevented from collective bargaining with the insurers for better contracts–because that would be anti-competitive and price-fixing. The insurers promised increased patient volume to physicians in return for modest reduction in reimbursement, but delivered no extra patients for lots less money–and often money with loads of gnarly strings attached.

As insurers increasingly got the upper hand, their business practices became ever more egregious, secretive, and nefarious. Ever striving for efficiency, they moved from individual personal claim review–the insurance clerk simply tossing your filed claim in the trash, then telling you it got lost–to computerized screens and edits, codifying their intrusive, capricious, and often unethical policies behind a digital ski mask. So while they bent, folded, and mutilated the health care reimbursement system beyond recognition, they reaped a windfall of company profits while premiums soared, physicians’ reimbursements hemorrhaged, and claims hassles for physicians and patients multiplied like guppies. State insurance commissioners and attorneys general had neither the manpower nor the motivation to respond to the countless complaints from providers about unethical insurance practices, so the carriers quickly found themselves above the law, and acted accordingly.

Now, you may be thinking: “This is just a disgruntled physician griping because he can no longer buy a new Lexus every year.” Well, not really (never owned a Lexus, BTW)–and even if I were, there’s one small problem with this theory: the insurance carriers got busted, big time, for these very abuses.

In 2000, a huge class action lawsuit–one of the largest ever filed–was brought by individual providers and numerous state professional health care organizations against a group of major managed care companies, including Aetna, Anthem, CIGNA, Coventry Health Care, Health Net, Humana, PacifiCare, Prudential Insurance, United Health Care, and Wellpoint Health Networks. In the class action lawsuit,

… plaintiffs allege that in various time periods from 1990 to the present, [the carriers] improperly denied, delayed and/or reduced payment to healthcare providers by engaging in several types of allegedly improper conduct, including:

• Misrepresenting and/or failing to disclose the use of edits to unilaterally “bundle,” “downcode” and/or reject claims for medically necessary covered services;
• Failing and/or refusing to recognize CPT modifiers;
• Concealing and/or misrepresenting the use of improper guidelines and criteria to deny, delay, and/or reduce payment for medically necessary covered services;
• Misrepresenting and/or refusing to disclose applicable fee schedules;
• Failing to pay claims for medically necessary covered services within the required statutory and/or contractual time periods; and
• Misrepresenting and/or failing to disclose the use of inappropriate or unsound criteria to calculate payments due to Healthcare Providers compensated under a capitation system or payments due to Non-Participating Healthcare Providers based on usual and customary rates.

In addition, the … complaints allege that [the carriers] listed above conspired to engage in this conduct [can you say "RICO", boys and girls?-Ed.]. Plaintiffs claim that the conduct violated state and federal statutes, and they also seek recovery on common law theories, including breach of contract.

Well, now–maybe there is something to this, after all…

The managed care companies, as expected, denied all wrongdoing, and some fretted that the use of the class-action lawsuit against the health insurance industry would spell the end of the health care as we know it (one could only wish…). Last time I checked, however, the industry appears to be alive and well–and most of the big boys settled, forking over some serious cash to avoid having to open their laundry bag in court and display some really dirty diapers:

• Aetna: $100 million
• Cigna: $550 million
• HealthNet: $125 million
• Prudential: $22 million

Just to name a few.

Part of the settlement was carrier reforms designed to eliminate some of the most egregious practices, such as automatic downcoding, bundling several services into a single, less expensive service for payment, more transparency on fee schedules and edits, etc. As is the typical calculus for class action lawsuits, the aggrieved plaintiffs received chump change (less than $100 per physician in most cases) while a few attorneys won’t have to worry about paying their health insurance premiums for a long, long time–having reaped millions of bucks in attorney fees. Sigh.

But of course, the settlement left one critical thing unchanged: the fox still guards the hen house. There is no effective recourse–short of more class-action suits–against the big managed care companies, to prevent them from resorting to all the same tricks they did before the settlement. The fix is in, and the big carriers still control the non-federal health care market. The industry continues to reap huge profits out of health insurance, as exemplified by UnitedHealth CEO William McGuire, who last year had to struggle by on a mere $1.8 billion in salary, bonuses, and stock options. Tough to lower insurance premiums when you’re shelling out that kind of dough for executive payroll.

I–and every physician dealing with the managed care industry–could go on for hours about abuses such as these, and far more: straightforward appeals denied; endless waits on hold to find the status of unpaid claims; surgeries authorized before they are performed then denied payment afterward; claims denied as improperly filed when meeting the company’s explicit guidelines on their forms or electronic submissions; claims “lost” after submission, then denied when resubmitted for reasons of–you got it: duplicate submission; payment checks “accidentally” mailed to the wrong address; letters to patients describing your care as “medically unnecessary”; physicans dropped from health care networks, their patients notified of the reason as being “poor quality providers”–when their only sin was not providing care cheaply enough; the list is nearly endless.

The simple concept of health insurance as spreading medical financial risk over large numbers of people is long gone. It has become an aggressive, active network, working hard to undermine the delivery and affordability of health care, reducing true competition and financial transparency, and manipulating health care decisions in countless–virtually always detrimental–ways.

If you think that Nigerian Petroleum deal is starting to look better–well, you may just be on to something.

This is a continuation of a series on medical coding, billing, and reimbursement.

Previous posts are here:

• Part 1–Intro & Procedural Coding
• Part 2–E&M Coding
• Part 3–ICD-9 (Diagnosis) Coding
• Part 4–Federal Compliance Programs

As most folks still drawing breath know, health care spending is rising at an alarming rate. The reasons for these spiraling costs are manifold: the introduction of expensive new technologies; an aging population; the detachment of financial responsibility for health care from the individual and positing it with employers and the federal government–just to name a few. The health care system in the U.S. is highly complex–scientifically, socially, and financially–and therefore finding workable solutions to such problems would be daunting even in a perfect world. But in a political world, creating functioning complex compromises, or fundamental redesign of programs, payment methodologies, and incentives, has become an utterly unachievable goal. So when constituents demand an instant, painless “fix” for skyrocketing budgets and health insurance premiums, there is one apparition which can always be called forth like Hamlet’s Ghost: stamping out fraud and abuse.

Fraud and abuse, of course, is the universal bogeyman: it is an unassailably noble deed to eradicate it from the face of the earth. Who can argue against eliminating fraud? The politicians look righteous (no small feat, this), and the public smiles with smug satisfaction, knowing that somewhere, someone richer and smarter (and luckier) than they is getting nailed. Stereotypes get trotted out like costumed revelers on Mardi Gras: greedy cigar-smoking corporate CEOs; smarmy, scheming tobacco executives; Gucci-shoed lobbyists larding campaign war chests; and of course, rich, greedy doctors. Nothing gets the national pulse up quite as nicely as a well-publicized perp walk.

And anti-fraud measures–especially ones powered by the bottomless pockets of the federal government–work. They work wonders, in fact. Not in stamping out fraud, mind you–to stamp out fraud you’d need to eliminate the human race–but financially, they are gold mines.

Consider this:

Total False Claims Act recoveries since the 1986 amendments now total over $17 billion, with nearly $1 billion recovered in the first quarter of FY 2006 alone…

In the health care arena alone, the U.S. Government is recovering $13 back for every $1 invested in False Claims Act health care investigations and prosecutions. About 80 percent of all False Claims Act cases are now filed in the health care arena [emphasis mine]

Think about that for a moment: $1 billion recovered in the 1st quarter 2006 (the article is from January 2006), with 80% of new claims filed in health care alone.

Keep in mind that the False Claims Act deals with fraud involving every entity doing business with the Federal government. That includes military contracts, research grants, educational subsidies, job training programs, government consultants, companies providing office supplies and paper to the millions of bureaucrats in government, all the badzillions of folks getting federal subsidies and other financial perks from the Feds under contract. Yet 80% of all new claims are filed in the health care arena. Do you really think that health care has such a disproportionate percentage of the fraud in Federal financial relationships?

Obviously some fraud exists–many of the settlements involve cases where less-than-ethical or outright fraudulent behavior is obvious. The Columbia/HCA investigation found such major issues as corporate fraud: anti-competitive behavior, major accounting malfeasance, inappropriate relationships with doctors, and systematic “upcoding” (billing a higher service code than warranted by the care given). No heartburn about going after this sort of thing, to be sure.

But the Federal Rottweiler is hardly restricting his attack mode to big corporate evildoers: the little guy is very much in his line of sight. The complexity of the law make them even easier targets than the big guys–since they do not have the resources to expend on mastering and complying with this maze of regulatory gibberish. And the dog’s got very big, very sharp teeth: here’s some potential penalties for those found in violation of the law:

• Civil sanctions may be imposed when an individual “knowingly” submits a claim that he or she “knows or should know” will fall into a prohibited category. Civil sanctions may be imposed for each inappropriate claim submitted for payment. Civil sanctions may be as much as $10,000 for every claim ($50,000 for an anti-kickback violation) plus an assessment of up to three times the amount improperly claimed.
• Criminal penalties may be imposed when an individual “knowingly and willfully” defrauds the Medicare, Medicaid, or other federal health care benefits program. If there is a determination that even a single claim was submitted fraudulently, sanctions may include: imprisonment for up to five years; a fine of up $250,000 per claim; and a five-year exclusion (lifetime exclusion for a third conviction) from participation in the Medicare and Medicaid programs.

Yes, that’s right: $10,000 for every false claim. That’s every line item charge the Feds decide was incorrectly coded, to your benefit.

Let’s do some math: In my former group–a busy practice with three physicians and a nurse practitioner–we cranked through about 100 patients on a typical busy office day. These 100 patients generated about 250 line items of charges. In a typical month–about 23 such days–that comes to about 5750 line items a month. So if the FBI waltzes in one day, flashes their badges and starts auditing, and finds 1% of the charges “fraudulent” (mind you, this does not imply intentional fraud, but “You coded wrongly and should have known better“–and they will almost certainly find many more than this) That’s $575,000 in penalties for one month’s charges. After auditing, say, one month’s charts, they will then project this percentage retroactively, sometimes for several years–without ever auditing those charts. Can you say bankruptcy, boys and girls?

And like the sheriff of old, to catch all the bad guys out there, you just can’t do it alone: you have to deputize–and the deputies have a lot to gain by squealing.

The federal False Claims Act (Qui Tam) is the primary weapon in the fight against Medicare fraud. The largest government recoveries have resulted from the efforts of private persons who alert the government to fraud by filing a “whistle blower” lawsuit. These qui tam actions are brought under a federal law known as the False Claims Act, 31 U.S.C. Sec. 3729 et seq. The Act is intended to encourage people with information about possible fraudulent acts to come forward to help stop Medicare fraud. The qui tam law allows a person who has direct knowledge of anyone who is taking federal money under false pretenses (such as falsely claiming to provide adequate nursing care and being paid federal money for that care) to sue on behalf of the government.

These individuals or whistle blowers are awarded a significant percentage of the money the government recovers as a result of their successful whistle blower lawsuits. Medicare fraud qui tam lawsuits have been responsible for some of the government’s biggest health care fraud recoveries. In 2005, the Justice Department recovered $1.4 billion in fraud and false claims and has recovered more than $15 billion since 1986. In 2005, whistle blowers were awarded $166 million for succeeding in their claims.

That’s right, our government is giving big bonuses to folks who turn you in.

Let’s say your new junior associate, Dr. Mel Feasance, looks good on paper but is a slug. He never answers his pages, sees as few patients as possible, has terrible bedside manner, fights with the other partners: a real loser. But he’s no dummy: he helps the billing specialist code the procedures and visits–always making sure to be very generous, so the group brings in more and his take is higher. After a year or two, you fire the worthless toad. Well, Dr Mel doesn’t take kindly to your falling out, and files a qui tam lawsuit on the government’s behalf–blowing the whistle on his “corrupt” partners. The gumshoes waltz in, find a host of problems–and good ol’ Dr Mel may walk away with up to 30% of the final settlement between the group and the government. Nice work if you can find it.

Or Susan D’Meanor, that charming young thing you’ve just hired to manage medical billing, seems very efficient: there is never a stack of unprocessed claims on her desk. But that’s because you can’t see the pile of unfiled forms in her desk, or the creative coding she does to get those claims paid which do get paid. Well, your bottom line drops like a rock, your books don’t balance at the end of the year due to all the “adjustments,” and Miss D’Meanor’s new car seems a bit too racy for her $15,000-a-year salary. So you fire the thieving wench–and Bingo!–she’s just won the lottery: her qui tam settlement will help pay off that new Porsche in no time.

And, of course, as a physician or health care facility, in such an investigation, you will be treated with the utmost respect and deference to your mission and profession … or maybe not:

• In August 1999, Dr. Robert Gervais, a cataract surgeon practicing in Arizona, was invited to a public meeting on a HCFA project. Federal agents were hiding behind a one-way mirror at this public meeting to see which doctors were making negative comments about HCFA and the project. Dr. Gervais was critical. A little more than a month later, Dr. Gervais’ clinic was subjected to a “surprise” inspection, where federal authorities found “deficiencies” in his documentation. Dr. Gervais’ plans to remedy the “deficiencies” in the time HCFA required (6 days) were deemed unacceptable, and his clinic was then “de-listed” by Medicare.
• In another case, in February of 1999, 37 armed, flak-jacketed agents carried out a Medicare raid on East Tennessee Woods Memorial Hospital, a 72-bed hospital in Eastern Tennessee. The invading army of armed federal agents stomped into the hospital, trampling through sterile areas, forced employees into a small room and held them.
• In another case, at Dr. Danny Westmoreland‘s office in West Virginia, three armed federal agents invaded and held everyone at gunpoint, including the physician, his wife, patients, and children.

So, if you’re wondering why doctors are feeling a bit under the gun of late, I hope this helps you get some insight. But I do have some good news (and no, it’s not about my car insurance): the Feds make even the malpractice attorneys seem warm and fuzzy by comparison.

Welcome to health care in the new millennium.

This is a continuation of a series on medical coding, billing, and reimbursement.

Previous posts are here:

• Part 1–Intro & Procedural Coding
• Part 2–E&M Coding
• Part 3–ICD-9 (Diagnosis) Coding

There–glad you’re back. Hope you enjoyed your lunch. I know after a meal we all tend to get a little drowsy. So to keep you from dozing off, I thought I’d tell a really, really scary story.

A number of commenters have asked the question, in so many words: “How did physicians ever allow this crazy system to come to pass?”

Good question.

And the answer is easy: when you dance with an 600-pound gorilla, the dance ain’t over ’til the gorilla says it’s over.

The gorilla, of course, is the federal government, and the dance, the provision of health care services covered under federal programs such as Medicare and Medicaid. For most medical practices treating adult patients, Medicare constitutes a significant percentage of total patients in a practice–and therefore a substantial percentage of income. One cannot accept federal reimbursements for medical services without being subject to federal regulations and restrictions. Since the vast majority of patients over the age of 62 are covered by Medicare, you’re pretty much stuck with the gorilla. She ain’t pretty, but she’s the only gal available–and she sure can dance.

Initially, after the introduction of federal health care financing in 1964, the system was pretty easy-going. Billing was done on a UCR basis (see part 1), and while federal fraud statutes existed, they were rarely implemented except in egregious cases of financial mendacity. When the federal coding regulations and guidelines came out about 10 years ago, physicians were stunned and angry–although not entirely surprised: the feds had been tightening up on hospitals for several years using a fixed-payment-by-diagnosis-group system called DRGs (diagnosis related groups), which grouped hospital admission diagnoses into groups based on the resources they used, and paid accordingly. DRG’s started the chess match between federal payers and private providers, where the feds tried to slash expenditures, and the hospitals, under increasing financial pressure, sought to maximize revenues by “working the system”–taking advantage of its complexity and vague definitions to improve–or at least maintain–their bottom line. As you can imagine, the perspective of the federal payers and the hospitals on what constituted correct interpretation of the complex rules–and what constituted fraud–was quite different–and some hospitals (especially several large for-profit hospital chains) moved a bit (or more than a bit) too far into the gray zones, and found themselves under federal investigation.

Physicians watched this high-stakes chess match with fascination and horror. Hospitals were under intense pressure to discharge patients sooner (they were reimbursed a fixed amount by diagnosis, and lost a boatload of money if your stay was too long), and in turn pressured doctors on their staffs to follow suit. Even though it was the hospitals, not the doctors, who stood to lose, most physicians complied (the hospitals played hardball with physicians, kinda like your Italian cousin Guido: “It’d be a real shame if yuz had a terrible accident or sometin’ like dat”). While shortened hospital stays were not all bad–there was definitely fat in the system–the inevitable result was more patients were discharged “quicker and sicker.”

So when the coding guidelines for physicians were released, the rules of the game were already known: the feds would use the complexity of the rules, and their hand on the purse strings, to ratchet down reimbursements–and doctors knew they had to know the rules inside and out to avoid a financial bloodbath–or worse.

Nothing sharpens the mind quite like the threat of financial disaster. Except maybe jail time.

Doctors are nothing if not problem-solvers: throw them a bone and they’ll hollow out the marrow like a hungry dog. So they threw themselves with abandon into mastering the rules. The implementation of the coding guidelines for physicians was in reality the Medical Consultant Full Employment Act: everybody needed help mastering these bad boys. There were conferences, seminars, lectures, books galore; doctors paid thousands to practice consultants in courses and in-house practice assessments. But many physicians, calculating that the complexity of the rules–and safety in numbers–would keep the feds from looking too closely at the “little guy,” made an entirely rational choice: ignore the rules, and keep doing what you’re doing, taking care of patients.

This laisser-faire attitude came to a screeching halt with the introduction of federal compliance programs.

The shot over the bow was the passage of HIPAA–the Health Insurance Portability and Accountability Act of 1996. This act is best known by its privacy regulations: it is the reason for that proliferation of forms and brochures about information release and privacy policies you get to sign at your doctor’s office. But it also established a national Health Care Fraud and Abuse Control Program–a program designed to coordinate federal, state, and local enforcement activities with respect to health care fraud and abuse. With HIPAA’s enactment, the OIG (Office of Inspector General) launched a major initiative to promote “voluntary” adoption of compliance programs by provider organizations, such as hospitals, nursing homes, laboratories, and doctors’ practices.

OIG guidelines list seven components of a basic voluntary compliance program:

1. Establish auditing and monitoring activities. A practice’s standards and procedures are periodically reviewed for currency and accuracy and to identify where its current compliance program may put the practice at risk.
2. Develop written practice standards and procedures to address all identified areas of risk. The practice should develop written procedures to reduce the chance of coding and billing errors, filing of erroneous claims, and to deal with those particular areas that have been identified during the audit that put the practice most at risk.
3. Designate one or more individuals to provide compliance oversight. The designated compliance officer(s) can be responsible for developing a corrective strategy to cure areas of identified risk, and for overseeing the practice’s implementation of its comprehensive compliance program.
4. Conduct appropriate education and training of employees. At a minimum, OIG recommends all professional and support staff with any involvement in coding and billing be trained in the practice’s compliance standards and procedures. Training should consist of, but not be limited to, coding requirements, information on developing and submitting claims, federal and private health care program requirements in order to submit accurate bills, and the sanctions for non-compliance.
5. Respond to and cure compliance breaches. A practice’s commitment to compliance includes ongoing monitoring in order to detect and respond to evidence of misconduct. If it becomes apparent that the compliance program is failing to prevent a particular type of violation, the program may require modification or that staff training be enhanced.
6. Develop open lines of communication to foster compliance and reporting of violations. Policies should be developed to encourage meaningful and open communication to the designated compliance officer of suspected erroneous or fraudulent conduct and protecting, as much as possible, the anonymity of the reporting party.
7. Develop and publicize guidelines to inform staff of the consequences of non-compliance. Employees at all levels must be accountable for the practice’s compliance requirements and subject to disciplinary action for their intentional or reckless non-compliance.

Each and every health care entity–from the humble country GP treating your sore throat to national hospital and nursing home chains–was “encouraged” to implement these “voluntary” programs. No, there was no penalty if you didn’t–but if you got audited, and didn’t have one in place–well, as one summary succinctly put it:

The penalties for submitting fraudulent claims are significant: criminal prosecution and civil and administrative enforcement that can result in huge monetary penalties and sanctions that exclude the physician from Medicare and Medicaid. However, penalties for violating the law may not be as severe for those with a compliance program in place. Of course, establishing compliance duties and failing to live up to them may serve as evidence of intentional disregard of the law and may therefore enhance penalties. [emphasis mine]

Notice the Catch-22 here?

• If you are audited, and problems found (as they always will be), and have no compliance program in place, you’re screwed.
• If you are audited, and problems found (as they always will be), and have a compliance program in place, you’re still screwed–but maybe a little less–unless we determine you weren’t following your own policies (and we always will).
  Can you say, “Abu Ghraib”? (“Just stand on this platform, Doctor, while we hook up these electrodes. Nice cloak you’re wearing there…”)

Now, it’s not too hard to see that setting up a compliance program is no small undertaking: there’s policy and procedure manuals to write; extensive internal risk assesments; employee training on a regular (and well-documented) schedule; mandatory corrective disciplinary actions against employees who violate the rules (knowingly or unknowingly); formal lines of communication to establish (including the right to anonymity for anyone reporting a problem); internal and external audits. No small task even for a large organization such as a hospital or large medical group; absolutely crushing for small medical practices. The OIG’s solution for the small medical group? Deputize the physician to be the sheriff, policing not only his own staff but his own behavior. Anyone see a conflict of interest here? You decide your coding is just fine; the feds disagree. Not only are you guilty of fraud, but of a cover-up because you didn’t report your own failings to the proper authorities. If you think it sounds a little like Communist re-education camps (“I am a lowly worm, a bourgeois capitalist enemy of the State, unworthy of the Chairman’s mercy!”), you’re definitely getting good at this stuff. Want to come work in my office? I’ll make you the compliance officer.

The legislation uses the False Claims Act as its principle weapon to fight fraud. And what a weapon it is–and that’s where our story starts to get really scary. So stretch your legs and be back in five. Soft drinks and a bowl of Prozac will be in the hallway to the right.