Congress blasts oversight of third-party billers

OIG suggests eliminating payment incentives such as compensation arrangements

The House Committee on Commerce Subcommittee on Oversight last week blasted the Health Care Financing Administration (HCFA) for its lax oversight of third-party billing companies. But experts say the potential remedies, such as registration of those companies, could have an unintended impact on billing companies, as well as other health care providers.

"If you make requirements too restrictive on third-party billing companies, they may just pass those requirements along to their clients," says health care attorney Stephen Vincze, a partner with Vincze & Frazer in Atlanta. "Practices that don’t want to abide by those restrictions may just set up their own billing operation internally and not register it."

"The other concern is that this could unwittingly do away with the third-party billing industry," adds Vincze. "I am not sure I agree with that but, it is a concern that needs to be looked at carefully."

At the request of Commerce Chairman Rep. Tom Bliley (R-VA), the General Accounting Office (GAO) examined a Texas health care provider who was using a third-party biller to submit claims to Medicare. The GAO found that Behavioral Medical Systems in Sugarland, TX, was able to submit $1.3 million in false claims that went undetected.

Bliley said he was "equally shocked" by the Department of Health and Human Services’ Office of Inspector General’s (OIG) finding that many Medicare contractors have no way of knowing who actually submitted a claim to Medicare, or how many claims were submitted by a third-party biller.

"They lack even basic information about who submits a claim," Bliley asserted. "According to the OIG, anyone with a computer, a modem, access to a provider’s number, and a patient’s health insurance number could send false claims to Medicare."

Lewis Morris, assistant Inspector General for Legal Affairs, told the subcommittee that program evaluations by the OIG and GAO highlight the federal health care program’s potential vulnerability to unscrupulous third-party billing companies.

According to Morris, payment incentives, such as percentage compensation arrangements, invite abuse. In addition, Morris said training of billers and coders is inadequate, and the ability to identify and track third-party billers is almost nonexistent.

To remedy those shortcomings, Morris told the subcommittee that the OIG has formulated tentative suggestions for reform measures. First, he said companies that administer federal health care programs should have an effective mechanism to identify third-party billers.

Morris says this system should track billing companies’ overall billing patterns, link specific claims with particular billers, and require that claims be submitted only from authorized sites. Mandatory registration of third-party billers and clearinghouses could provide an audit trail.

Second, he says Congress should consider prohibiting the use of payment incentives in third-party billing contracts, no matter how the arrangement is structured.

Finally, he says minimal training should be mandated to discourage unscrupulous billers from gaining access to federal health care programs.

According to Mark Pastin, president of the Alexandria, VA-based Council of Ethical Organizations, the elimination of incentive programs could ultimately impact physician practices that tie those programs to the volume of services rendered, as well as hospitals that use them within their billing and administrative departments.

"If a hospital has an in-house billing department, they may well be incentivized on the percentage of bills they collect," Pastin explains. "Likewise, if a hospital runs a physician practice, the physicians are probably incentivized on the basis of revenues." He argues that those incentives have the same effect as incentives to third-party billing agents.

"A lot of people would like to see incentive arrangements go away, but you have to do it across the board," Pastin argues. "It can’t be something that is prohibited for a third-party billing company, but not prohibited for a physician practice to do in-house."