Reuters shows how shell companies hide Medicare fraud in plain sight

Reporting for Reuters, Brian Grow and Matthew Bigg used an analysis of public data to investigate the practice of using shell companies to defraud Medicare of millions while staying a step or two ahead of federal investigators.

While the specific damage inflicted by shell companies has not been tracked, “Last year, ‘improper payments’ resulted in $48 billion in losses to the Medicare program, nearly 10 percent of the $526 billion in payments the program made, according to a Government Accountability Office report last March.”

“Simply by reviewing the incorporation records of Medicare providers in two buildings” in Miami, they write, “reporters uncovered information that one government official said could prompt “a serious criminal investigation” of some of the companies.”

The fraud rings merge stolen doctor and patient data under the auspices of a shell company and then bill Medicare as rapidly as possible. Other shell companies are often layered on top to camouflage the fraud, law enforcement officials say.

Some of the shells purport to be billing companies; they form a buffer between the sham clinics and Medicare. Others pay kickbacks to doctors and patients who sign off on bogus medical claims or sell their Medicare ID numbers to enable the shell company to bill the government. Still other shells act as fronts to launder the profits.

The key to this kind of fraud, known as a “bust-out” scheme, is for each of the fake companies to bill as much as possible before authorities catch on. Shell companies become a tool that helps keep the crooks ahead of the cops.

The Armenian crime ring whose fraud made headlines last year used 118 shell companies in 25 states and bilked the feds out of at least $100 million. Varying incorporation rules make state-hopping and obfuscation “easy,” they write, especially since states don’t check to see if records are legit before they allow a company to incorporate. The reportes found that even a few simple safeguards would go a long way to detecting the boldest frauds.

In Florida, FBI agents say almost every Medicare fraud scheme involves shell companies. There, Reuters scrutinized incorporation documents for firms located in two buildings near the Miami International Airport. In a building with dimly lit corridors, a rickety elevator and almost no one in sight, a host of companies purport to provide services to Medicare recipients. But telltale signs of fraud abound.

Many of the 26 companies in the buildings had replaced corporate officers at least once in the last four years. Some had changed ownership, or their corporate executives represented more than one medical-related company. Law enforcement officials consider such activities to be red flags for fraud.

For its part, CMS told the reporters it simply didn’t have the resources necessary to conduct the widespread audits needed to catch fraud, though the $350 million allocated to such efforts under the 2010 health reform law should help.

Health journalists who will certainly want to review the “methodology” subheading at the end of the story.

‘Doc fix’ flies in the face of rewarding quality, not quantity, of treatment

One of the last things that Congress did before finally getting out of town a few days before Christmas was the so-called “doc fix” – finding money to stave off a scheduled cut for Medicare physician payments. But they only did it for two months – meaning lawmakers will come back in January and struggle with it all over again.

The uncertainly, coupled with the prospects of what, on paper at least, could be a 27 percent fee cut, raises questions about whether more physicians will start cutting back on the number of Medicare patients they take, or dropping out of the program altogether.

It’s also worth reflecting on what this Medicare payment system (formally known as the Sustainable Growth Rate or SGR) means – because it reinforces the very heart of fee-for-service medicine at a time when the health reform law, and many large employers and insurers, are supposedly trying to nudge the health care system away from fee-for-service, which encourages volume. The goal is to move toward new models of more coordinated and integrated care that are supposed to promote value.  So the irony is that we’re tying ourselves in knots about SGR – which pays doctors for how much they do – when the focus is supposedly on creating a system that rewards doctors for how well they do. Go figure.

The SGR dates back to one of those sprawling congressional budget deals, back in 1997. It is supposed to link Medicare physician costs to larger economic and population trends. But the formula didn’t work. Everyone in Washington has pretty much agreed on that. But they haven’t agreed on how or when to replace it. There’s been a lot of talk about coming up with a “doc fix” for a couple of years to allow time for a transition to a TBD new system. But that’s a tall order, given that all the parties don’t agree on what a new system should look like, or which of the new payment systems and incentives being tested are going to turn out to work well (and how long it may take to get them working.)

Until 2002, payments under the SGR rose modestly. Then in 2002 physician Medicare fees were cut by 4.8 percent. In subsequent years, Congress (heavily lobbied by physician groups) postponed the cuts called for by the SGR formula, or approved modest fee hikes. Now, the cumulative postponements mean that doctors face a 27 percent cut – and erasing it would cost about $300 billion over a decade. payments have grown very modestly for nearly a decade now. On top of the SGR issue, physicians and all other Medicare providers face a 2 percent cut starting in 2013 under last summer’s deficit-reduction agreement.

The Medicare Payment Advisory Commission, or MedPAC, knows a mess when it sees one.

The system … has failed to restrain volume growth and, in fact, may have exacerbated it,” MedPAC wrote to Congress earlier this year, recommending yet again that the formula be jettisoned. To a certain extent, cutting physician payments for specific services only encourages them to offer more services.  There isn’t an expert consensus on exactly how much or precisely how the SGR system stimulates more volume. But a recent New England Journal of Medicine article found that doctors in some states were digging the SGR hole much deeper than others (Florida, Texas and New York being among the major culprits). And some specialties’ “excess growth” is much more than others (these include internal medicine, cardiology, diagnostic radiology, and family practice - some of which I would not have guessed.) This doesn’t mean that fees should be slashed in some states and not others, or that family practitioners should get a pay freeze while neurosurgeons make even higher incomes. But it does suggest, as the Harvard health policy experts that wrote the NEJM piece note, that new systems, less blunt and less arbitrary, are required.

The congressional focus on short-term “doc fixes” – a decade’s worth now – blunts the momentum for permanent change. “If you are always doing a fire drill, and finding a perpetual one-year patch, it keeps you from confronting the larger mega-reform that’s needed,” Tom Miller of the American Enterprise Institute observed.

The AMA and other physician groups have warned for years that more and more physicians will stop treating Medicare beneficiaries. On an online AMA survey in 2010, one in five doctors overall, and nearly one-third of primary care doctors, said they are already limiting Medicare patients.

So while Congress struggles for a way out, it’s probably a good time to look at what physicians are doing in your state. (This AMA guide to choices doctors can make about Medicare participation may be useful.) I suspect a lot of doctors don’t quite understand what’s going on in Congress (because as we saw during the pre-Christmas impasse, Congress didn’t seem to quite understand what’s going on in Congress.)

• Do physicians think they will actually get a 27 percent cut? (They won’t - but they may not get an increase or only a modest one.)
• Are they preparing to drop Medicare patients or at least take fewer new ones?
• Have they begun to understand why the system is unsustainable, and become increasingly open to alternatives including ACOs, bundling, medical homes, etc?
• Are they coming up with any creative local solutions? Or are they just assuming that somehow the system can keep muddling through indefinitely?

Americans unprepared to pay for long-term care

In the Chicago Tribune, Deborah Shelton examines how unprepared Americans are to pay for their own long-term care needs as they age. Long-term care tends to slip under the radar because, as one of Shelton’s sources told her, “People buy insurance for their life because they know they are going to die, for their car because they know that can get in an accident and for their health because they know they can get sick, but people don’t tend to buy insurance because they think they are going to need someone to help them take a bath.”

Long-term care encompasses everything from nursing home fees to in-home assistance with everyday routines. It all comes with a price tag; Medicare only covers a limited amount and Medicaid programs apply only to those below certain economic thresholds. That leaves the middle class, who can’t afford the services but don’t really qualify for Medicaid, in the lurch, Shelton writes.

Most people assume Medicare will pay the bills, but the program covers long-term care only under certain conditions and for a limited time. While Medicaid covers long-term care, beneficiaries have to be poor or willing to “spend down” their assets to be eligible. Private insurance can be expensive and excludes applicants with serious medical problems.

As a result, many families pay out of pocket until they exhaust their resources and then turn to Medicaid.

The Affordable Care Act attempted to fill in the blanks, but long-term care provisions of that reform plan withered under intense cost pressure.

An initiative that would have incorporated long-term care into the Obama administration’s health reform plan was scrapped in October after actuaries determined that it would not be financially self-sustainable over the long haul. The Community Living Assistance Services and Supports Act would have created a voluntary, self-funded, employer-based insurance option to help people save for long-term care.

Related

• CLASS Act is gone but long-term care problem remains
• Long-term care insurance premiums jump

Aging in place becoming more popular, possible

In the latest installment in The Associated Press series on growing old in America, David Crary explores how the health care system is evolving to accommodate “aging in place” and seniors’ preference to remain in their private homes, even at points when their health care situation might seem to suggest relocation is in order. As the population ages, this preference is starting to play a role in policy decisions.

There’s no question that aging in place has broad appeal. According to an Associated Press-LifeGoesStrong.com poll conducted in October, 52 percent of baby boomers said they were unlikely to move someplace new in retirement. In a 2005 survey by AARP, 89 percent of people age 50 and older said they would prefer to remain in their home indefinitely as they age.

Communities have explored a number of programs to better serve this population, and Crary profiled some of the more notable efforts, including:

• The Naturally Occurring Retirement Community (NORC)
  

  … can be either a specific housing complex or a larger neighborhood in which many of the residents have aged in place over a long period of time and need a range of support services in order to continue living in their homes.

• “Village” organizations
  

  Members of these nonprofit entities can access specialized programs and services, such as transportation to stores, home health care, or help with household chores, as well as a network of social activities with other members.

  About 65 village organizations have formed in the U.S. in recent years, offering varying services and charging membership fees that generally range between $500 and $700 a year.

• Aging-friendly homes
  

  AARP has teamed up with the National Association of Home Builders to create a designation for certified aging in place specialists trained in designing and modifying residences for the elderly. Several thousand builders, contractors, remodelers and architects have been certified. Building or remodeling homes can include such details as touchless faucets, trim kitchen drawers instead of cupboards, grab bars and nonslip floors in the bathrooms.

  Arizona’s Pima County, along with a few other local governments, has gone a step further, passing an ordinance requiring that all new homes in the unincorporated areas around Tucson offer a basic level of accessibility. They must have at least one entrance with no steps. Minimum heights and widths are set so that light switches can be easily reached and doorways are passable in a wheelchair.

• Medicaid changes
  

  In several states, there’s debate about whether to promote aging in place by shifting more Medicaid dollars to community-based programs and away from traditional nursing facilities. But budget problems may complicate such efforts as some financially struggling states cut back on home health services that help keep some elderly people out of nursing homes.

Medicaid programs slow to act against system exploiters

At ProPublica, senior reporters Charles Ornstein and Tracy Weber have published the latest turn in their ongoing analysis of conflicts of interest, problem physicians and the disciplinary systems meant to reign them in. This time, they look at Medicaid in Florida and find at least three instances when the state “allowed physicians to keep treating and prescribing drugs to the poor amid clear signs of possible misconduct.”

Their piece revolves around those key examples – two of which were, in all seriousness, brought to their attention by a Scientologist-run watchdog website – and I strongly recommend you read the whole thing for the details. Below, I’ve just highlighted the bigger picture.

In general, Ornstein and Weber found, state Medicaid programs, as well as the federal Centers for Medicare and Medicaid Services, which doesn’t track relevant state data, have failed to act on information which seems to strongly indicate that certain physicians are abusing or exploiting state programs.

Medicaid programs across the country have long had evidence that physicians have been prescribing risky drugs in excess and perhaps to the wrong patients. These prescriptions also racked up huge bills for the programs.

But like Florida, many states did not act on that evidence. Last year, (Sen. Charles) Grassley demanded data from each state about its highest prescribers of pain pills and antipsychotics, and he asked state and federal officials to determine whether the prescriptions written by these doctors were legitimate.

‘Dual eligibles’ pingpong between programs, getting stuck along the way

The phrase “dual eligibles” has always been a mouthful for describing people old enough (or disabled enough) to be on Medicare and poor enough to be on Medicaid.

M.C. Kim, a cardiac patient quoted in Anna Gorman’s nice Sunday  Los Angeles Times piece on the “duals,” comes up with a clear and easy-to-grasp alternative image: pingpong patients.

M.C. Kim had four heart attacks in as many years. Each time, he left the hospital not knowing why his heart had failed.

When he tried to enter a cardiac rehabilitation program to learn how to reduce the odds of having more heart trouble, the Medicare office told him to call Medicaid. The Medicaid office told him to call Medicare. In the end, he said, both denied coverage.

“I was like a pingpong ball,” said Kim, 51, who lives in Los Angeles. “Nobody wanted to take responsibility.”

So Kim kept returning to the emergency room, racking up expensive medical bills for taxpayers.

The “duals” get their doctors and hospitals paid for by Medicare, and their long-term care by Medicaid.  (That’s overly simplistic, but you get the main idea.) As they go back and forth between settings, they get caught between two systems that should mesh but often are more like mismatched gears that grind and jam and make noise and get stuck.

Care transitions, a weak point in the health care system in the first place, are particularly disastrous for this population. In fact, the mismatched incentives and insane amount of built-in levers to shift costs may increase the number of care transitions -which boosts costs and create all sorts of opportunities for mishaps and miscommunication that can harm patients.

Gorman’s story is a nice illustration, giving examples from both the elderly and the disabled.  She puts a face behind the red tape.

The health reform law takes some steps toward solutions - although this is a tough problem and it’s certainly too soon to say that the reform law will fix it.

A few pieces of a potential solution:

CMS now has a special office on the duals. I interviewed Director Melanie Bella for Kaiser Health News earlier this year. She  has testified at least twice before committees in Congress: On June 21 (PDF) she went before the U. S. House Committee on Energy & Commerce, Subcommittee on Health and on Sept. 21 (PDF) she was before the  U. S. Senate Committee on Finance. Her testimony can give you an idea of what steps her office is taking and which part is relevant to your state or community.

Medicaid managed care, advanced medical homes, ACOs, penalties for high readmission rates, payment bundling and other reforms may eventually provide better coordinated care for the “duals.” Some of the new programs for the elderly encouraged by the law, such as Independence at Home, may also help. There are more details about delivery system and the duals in this Kaiser Family Foundation brief.

The Alliance for Health Reform also did a whole briefing on this topic a few months ago. This link will take you to resources, an archived webcast, and a transcript (for those of you who would rather skim than watch the webcast)

The SCAN Foundation also has a lot of material on the duals on its website, including this report on state-based solutions.

Texas psych clinics take Medicare’s millions without oversight

The Houston Chronicle’s Terri Langford reports that for-profit outpatient psychiatric clinics in the state, most located around Houston, are collecting millions in Medicare dollars yet “require no license to operate in Texas.”

She writes that, despite access to significant federal funds, the clinics are subject to little oversight from any level of government, especially when it comes to patient care.

…other than a one time inspection conducted by Medicare when clinics start operating - these programs have no detailed standards or “conditions of participation,” that must be met before filing claims and collecting taxpayer money.
…
The U.S. Department of Health and Human Services flagged the problem earlier this year, saying “no regulatory basis exists to ensure basic levels of quality and safety” for CMHC care.

The loopholes, including the lack of an established means to kick poorly performing centers out of the medicare system, apply nationwide, but their exploitation remains localized.

Records show that in 2009, Medicare paid $287 million on these programs nationwide, 74 percent of them located in the three states that have no state licensing requirements: Florida, Louisiana and Texas.

Medicare providers get reinstated when feds fail to attend hearings

Using data obtained through a public records request, Associated Press reporter Kelli Kennedy (@kkennedyap) reviewed federal Medicare fraud reports from between 2006 and 2009 and found that “Regulators fighting an estimated $60 billion to $90 billion a year in Medicare fraud frequently suspend Medicare providers, then quickly reinstate them after appeals hearings that government employees don’t even attend.”

Officials revoked the licenses of 3,702 medical equipment companies in the fraud hot spots of South Florida, Los Angeles, Baton Rouge, La., Houston, Brooklyn, N.Y., and Detroit between 2006 and 2009, according to data provided to the AP under a public records request. Those areas represent the highest concentrations of Medicare fraud in the country, according to federal authorities who have set up task forces there.

Of the providers who lost their licenses in those cities, about 37 percent, or 1,371, were eventually back in business, sometimes within days and often within months.

Furthermore, she writes, officials have not taken advantage of security bonds put in place two years ago to provide redress should a fraudulent provider vanish from the map. “Officials blame the delay on personnel changes,” she writes.

The gaps in the system grow out of poor communication between one set of contractors paid to inspect Medicare providers and alert officials to suspicious activity; a separate set of contractors that handles payments; and the agency that runs Medicare.

Kennedy’s report dives deep into the Medicare fraud reinstatement program, and reporters looking to better understand the system would be well served to read the full investigation.

Groups push for transparency in Joint Commission’s hospital accreditation surveys

The Lexington Herald-Leader’s Jim Warren reports that about 50 advocacy groups, including the Consumers Union and Mothers against Medical Error, have joined forces to ask Congress to make the survey data behind hospital accreditation freely available to the public.

Their main target is The Joint Commission, a non-profit group that sets performance standards and is hired by hospitals and other health-care organizations to measure whether they meet those standards. In many states, Joint Commission accreditation is the basis for hospital licensure. It conducts extensive surveys every three years or so, and funds its efforts by charging hospitals upward of $45,000 for the privilege of being evaluated.

The Joint Commission’s disclosure practices last made headlines in January when, in response to pressure from AHCJ’s Right to Know Committee, it made accreditation information more readily available online.

For help finding and understanding Joint Commission reports and similar sources, AHCJ members can check out board president Charles Ornstein’s latest guide to Deciphering Hospital Quality Data, in which he addresses the strengths and weaknesses of myriad data sources and provides pointers on how to access and utilize them.

Back-to-the-beat resources on health reform

Since so many of us are in storm (or non-storm) what-are-we-going-to-do-with-all-these-batteries cleanup and back-to-school mode, I thought I’d bring some resources and interesting studies to your attention to help bring your focus back on the beat.

Confusion still reigns

You probably saw the Kaiser poll reminding us once again how confused people remain about the health reform law - including the very people who would be most helped by it, the uninsured. It got a lot of coverage but if you missed it, it’s a must read. It ties into the theme of massive national confusion – and the frustration I feel that the confusion persists despite a fair amount of good reporting – that I wrote about in the first post I did for Covering Health. I think a lot of the confusion stems from the mandate . People hear that they will “have” to buy insurance, and they panic or get angry because they can’t afford it. They don’t hear that they may well qualify for subsidies to make it affordable-and they don’t have to be dirt poor to get the subsidies; many middle class people will also benefit.

Most of the coverage of the KFF poll I heard or saw centered on the uninsured, but there is also a related data note looking at knowledge and expectations of people who have employer-sponsored health insurance. Asked what they would be willing to do to lower health care costs, the answer could be summed up as “not much.” They are OK with participating in a wellness program (although not necessarily actually getting “weller”) but didn’t like the idea of more generic drugs, more restrictive networks of doctors, or higher copays and deductibles.

Eating away at the doughnut hole

An AHCJ member found this report by EBRI, the Employee Benefit Research Institute, useful so I’m sharing. It’s about how the health reform law will slowly (over a decade) close the “donut hole” for Medicare drug coverage, and how repealing the health law would create a savings hole for older Americans who use a lot of prescription drugs. (The doughnut hole is the gap after you use up the basic drug benefit but haven’t hit the “catastrophic” level. Beneficiaries pay monthly premiums through the gap, but don’t get benefits until they burn through the gap. ) EBRI studies health care and retirement issues and does periodic issue briefs.

Staff physicians on the rise

The Center for Health System Change has been tracking health care developments in 12 communities and found that hospitals are hiring more staff physicians. In policy circles, the talk has been that the staff-physician model is a tool in creating more clinical integration, care coordination, higher quality and lower cost – but this study found that the hospitals are in it primarily for market share. Physicians like it because it’s fewer hassles. It doesn’t necessarily bring down overall health care costs. Now, this is a snapshot in a fee-for-service world; new payment models being developed by private insurers, and Medicare and Medicaid may change the dynamic. But it’s an attention-worthy snapshot. The HSC Issue Brief, “Rising Hospital Employment of Physicians: Better Quality, Higher Costs?” is available online.

Who applied to be ACOs?

There was a lot of coverage a few months back about all the health systems that were not going to apply to become Medicare Accountable Care Organizations, at least not under the original shared savings model. We aren’t hearing as much about who is applying – worth checking in your community. Medicare also created an alternative, called the pioneer ACO, to attract more plans. We won’t know until around November how many applied to be pioneers, or who they are, but here’s the story of one plan that’s ready to go.

Behind the drug shortage

There was a lot of discussion on the AHCJ electronic discussion list recently about drug shortages, particularly chemotherapy shortages. I was out of town for a few days (helping care for a relative and learning, among other things, that Medicare pays for oxygen concentrators but not for the batteries) and I haven’t caught up with all of the messages, but this essay in the Sunday New York Times a few weeks ago by Ezekiel Emanuel taught me lots I didn’t know about generic chemo drugs, pricing and shortages, and proposed solutions.

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