Waste, Fraud & Abuse. To hear Politicians talk about it, you’d think that the world of medicine is rife with it. After you read some of the stories below, you might wonder whether there are any honest doctors or hospitals. Some recent news items, coupled with some older stories, are fodder for reflection on this hot topic.
First, while it is widely accepted that government programs are often inefficient, it is not widely acknowledged that some of them invite fraud and abuse. Medicare, more than any other US government program invites fraud. Why? Because the government writes checks to people and companies that it does not directly employ to provide service to recipients who are also not in its employ. While most of the checks it writes are small in government terms, some are large. In almost all instances, the government has no ability to ascertain what service was rendered. Worse, due diligence is conducted with the imagination and initiative of…. the government. What this means is that due-diligence is almost exclusively about paperwork, which in turn, invites massive fraud.
There’s this recent story, which is simply astonishing:
94 people. 250 million dollars plus. That’s a lot of money. If the allegations are true, then some very greedy doctors have made wads of money. How? By prescribing and delivering physical therapy (which has no enduring tangible trail) fraudulently. The pay for each treatment would be modest, but the number of treatments at issue is massive. There are also alleged bogus bills for equipment and even procedures.
Even if you worked very, very hard, it would be hard to honestly generate the amount of billing alleged in this news item:
In this story, a single cardiologist is alleged to have billed in excess of 13 million dollars for ICU care. The story lacks specifics that make it hard to analyze for plausibility; it doesn’t mention the timeframe over which the billing took place (1 year? 7years?), nor does it mention whether this practitioner was engaged in other clinical work. Still, it’s hard to generate a scenario that could explain away this level of billing for a single practitioner. Readers note: the news item leads us to believe that at one point this physician had collected millions in billing.
Payment is for service rendered. In principle, it is for the service. In practice, it is for the paperwork. Submitting impeccable paperwork will reliably generate payment. The government audits paperwork because it can, and because it can do so cheaply. Good practitioners generate good care and mediocre paperwork. Many struggle to get paid for the honest work they do. In contrast, perpetrators of massive fraud generate no care and high quality paperwork. There are legends of huge sums paid to hospitals that never existed, operated by criminal conspiracies of physicians, office staff, and experts in medical billing. It is likely we don’t read about this much in the news because it might make the problem worse. The first news item above makes the scope of the problem clear: the feds have to pay people to go and see if there is actually a business providing the service represented at the address listed!
The dictum for practitioners is ‘If it isn’t documented, it didn’t happen.’; the dictum for perpetrators of massive fraud is: ‘if you document it, they have to prove it didn’t happen.’
Here’s an old story, also from Chicago:
The story, if true, is outrageous. The government is defrauded of 28 million dollars, and the defendant gets 3 years in prison. Worse, if all the relevant financials are contained in the news item, he’s millions ahead. How many? Who knows? We know how much restitution was ordered, but my guess is that only the defendant knows how much money he really collected. It wouldn’t surprise me if the difference is substantially higher than the newspaper item documents. Longer sentences are handed down for much smaller sums with regularity. Going to jail sucks, but there is no question that medicare fraud combines great payout and low risk for bold, competent criminals.
Medicare is not the only federal health care program plagued by allegations of massive provider fraud. This recent story is distressing because it suggests that not only can you run from the law, if you run long enough, you can drop off their radar:
So how much of this is happening? No one knows. Worse, fewer people care than you might think. Why? Because outright fraud is not where the money is. For the feds, the real money is making providers accept lower payments for services, rendered, and increasing the obstacles that patients/providers have to actually generating care. This last sentence from the first item says it all:
In 2008, authorities required all medical equipment providers in Miami to apply for new certification, hoping the paper hurdle would deter scammers. The number of claims dropped by $1.6 billion.
Does anyone think that there was that much fraud in Miami? No way. If there was, the FBI would have invaded. Nope. 1.6 billion is a LOT of money, way more than the sum of all of the fraud discussed above, and it’s just from Miami. We don’t have data, and thus we can’t know for sure, but my guess is that most of the equipment providers decided that it wasn’t worth the expense to apply for the new certification and simply got out of the medicare business. Fine for them, but this abrupt contraction of providers likely generated significant hardship for medicare patients. Similar strategies to pay less, make it harder to provide and obtain care, and increase the friction associated with generating care are on their way. They're going to make the administrative burden of providing care in any environment more difficult, and it is likely that they will do little to stop the kind of brazen fraud discussed above. In spite of the headlines about fraud, most of the savings from pursuing ‘waste, fraud and abuse’ is going to come from providing less and paying less. Ignore what the bureaucrats and politicians say. In this case, the numbers don’t lie.