Medicare intermediaries in spotlight of new federal effort to cut fraud, abuse

White House unveils new package of proposals

The federal fraud and abuse program has heated up on two fronts. The White House has announced a new investigative initiative directed at Medicare intermediaries, and the Chicago-based American Medical Association (AMA) has asked for an investigation of "petty harassment" of physicians by the government.

Just days after the White House’s early December announcement of a major new initiative designed to continue ferreting out fraud in the Medicare and Medicaid programs, delegates at the AMA’s interim meeting in Honolulu weighed in with a report calling for Congress to investigate the Department of Health and Human Services for alleged misuses of its regulatory power in fraud investigations.

The AMA’s Dec. 7 report maintains that the Health Care Financing Administration’s "misuse" of regulatory authority includes its evaluation and management documentation guidelines and Correct Coding Initiative. The AMA also is asking Capitol Hill to hold hearings to "ensure that the federal government focuses its law enforcement efforts on truly fraudulent behavior, not inadvertent billing errors."

"Honest physicians of America have had enough and will no longer stand for petty harassment by auditors or for being falsely accused of abusive and fraudulent behavior," stated one AMA-approved report.

Given the bluntness of the AMA’s language, Capitol Hill insiders expect fireworks when the first round of HCFA oversight hearings is held by the Senate Finance Committee in early 1999. "We felt we had to do this because of the unrest we’ve been hearing from some providers," says Ted Lewers, vice chairman of the AMA Board of Trustees.

The AMA’s complaints came on the heels of the White House’s Dec. 7 announcement of a legislative and regulatory package of anti-fraud proposals intended to save $2 billion, including a new crackdown on Medicare contractors to make them more effective and accountable.

The President’s proposal is a combination of something old, something new, and something borrowed from previous anti-fraud recommendations and reports that the administration plans to implement over the next year. According to the plan, the administration will:

• Grant HCFA more authority to enhance contractor performance.

HCFA would get new authority allowing it to more quickly fire contractors who don’t perform well. The proposal would give HCFA the power to contract with a wider range of carriers to administer the program, and then to terminate them if they fail to perform effectively. The proposal would give HCFA greater authority to oversee contractor performance of such functions as enrolling providers, investigating fraud, and collecting overpayments.

Contract with special fraud surveillance units to ensure detection of fraudulent activities.

Office of Inspector General (OIG) reports have shown that many Medicare contractors do a poor job of investigating fraud. That is partially because they have a wide variety of other functions, and partially because they have multifaceted relationships with providers that may create conflicts of interest. As a solution, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) gave HCFA new authority to contract with specialized fraud, waste, and abuse surveillance units, or "fraud fighters," which HCFA says are better equipped to audit cost reports and conduct activities vital to the detection of fraud, waste, and abuse. The first fraud surveillance units will begin their efforts this spring.

• Require contractors to report fraud complaints to the Inspector General right away.

Many contractors now defer reporting cases of suspected fraud to the OIG when the dollar amounts are low, even though these reports could show significant patterns of fraud. In response, HCFA has sent program memorandums to all contractors requiring them to refer suspected fraud to OIG immediately, regardless of the amount involved.

• Announce a new comprehensive plan to fight fraud and abuse.

HCFA officials say they will very soon announce a new Comprehensive Plan for Program Integrity that relies heavily on increased audits and better internal data management.

• Eliminate excessive Medicare reimbursement for drugs.

A recent report by the OIG confirmed that Medicare currently pays hundreds of millions of dollars more for 22 of the most common and costly drugs than it would if it paid market prices. For more than one-third of these drugs, Medicare paid more than double the average wholesale price, and in one case paid 10 times the amount. This proposal would base Medicare payments on the actual acquisition cost of these drugs to the provider, eliminating current mark-ups, and, in turn, substantially reducing Medicare costs.

• End overpayments for Epogen, a drug used to treat anemia related to chronic renal failure.

An OIG report found that the current reimbursement rate of $10 per 1,000 units of Epogen exceeds the current market cost of the drug by approximately 10%. The administration’s proposal would reduce Medicare reimbursement to reflect current market prices.

• Prevent abuse of Medicare’s partial hospitalization benefit.

A recent OIG report found providers abusing Medicare by billing for partial hospitalization services that were never given or provided to many fewer patients than were billed for. This proposal would ensure that Medicare reimburses only for services actually given.

• Ensure Medicare does not pay for claims owed by private insurers.

Private insurers of working Medicare beneficiaries are required under law to be the primary payers of health claims. These insurers, however, do not always pay the claims for which they are responsible. This proposal prevents this abuse by requiring private insurers to report all Medicare beneficiaries they insure to HCFA. This proposal also would give HCFA greater authority to fine private insurers, including the authority to recoup twice the amount owed if insurers intentionally allow Medicare to pay claims for which they are responsible.

• Empower Medicare to purchase cost-effective high-quality health care.

Medicare now has limited demonstration authority to contract out with institutions — called centers of excellence — that have a track record of providing exceptionally high-quality care at a reasonable price. This proposal would expand this authority to urban areas that have multiple providers, thereby enabling the Medicare program to provide higher-quality health care at less cost.

• Implement competitive bidding demonstration for durable medical equipment.

The OIG recently found that Medicare rates for hospital beds are substantially higher than rates paid by other payers. HCFA will begin a demonstration this spring that will use competitive bidding to decrease Medicare payment for hospital beds and other durable medical equipment, thereby lowering program costs.