July 1997 Bulletin

War on fraud may have gone too far

IG uses 1996 Medicare rules for past billings

Medicare fraud and abuse is emerging as one of the most important issues in health care. Physicians, hospitals, home health agencies and other providers of Medicare services are subject to increased scrutiny of their billing and documentation.

New laws and regulations in the past year more clearly define the level of documentation required to justify the services billed, and also increase the criminal and monetary penalties associated with fraud and abuse. While fraud and abuse against Medicare has always been illegal, there is growing concern that the government's most recent efforts to combat fraud are going too far.

The Inspector General (IG) of the Department of Health and Human Services is charged with detecting and preventing fraud and abuse by Medicare providersóthose who charge for a higher level of service than was actually provided, or charge for services that were not provided at all. The IG and Department of Justice were given increased powers with the passage of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Commonly known as the Kennedy-Kassebaum law, the HIPAA established a special account within the Medicare Trust Fund earmarked towards combating Medicare fraud, and increased the criminal and civil penalties for fraud and abuse. Those found guilty can be fined up to three times the amount alleged to have been falsely claimed plus $10,000 for every improper bill, excluded from the Medicare program and, in severe cases, receive prison time. The law also encourages individuals (including patients or disgruntled employees) to report information on fraud and abuse by Medicare providers. That individual may collect up to 30 percent of any money collected by the government as a result of the information.

On July 1, 1996, new regulations clarifying the physical presence and documentation requirements for physicians at teaching hospitals went into effect. These regulations ended decades-old ambiguity over whether a teaching physician must be physically present during procedures performed by residents. The regulations now state that a teaching physician must be present during the "key portion" of the service in order to bill under Medicare Part B. In addition, the new regulations clearly indicate for the first time that a teaching physician's countersignature on the patient's record is inadequate for reimbursement.

Instead, the presence of the teaching physician during procedures may be demonstrated by notes in the medical records made by a physician, resident or nurse. For evaluation and management (E/M) services, the teaching physician must personally document in the medical records his or her participation in the service.

Thus far, the IG has conducted a few high-profile audits of teaching hospitals and physicians. In the Physicians at Teaching Hospitals (PATH) audits, the IG reviews 100 inpatient and 100 outpatient charts. Based on the number of billing errors found, the IG calculates an error rate and applies that rate to all billings submitted between 1990 and 1995 to determine the total value of "improper" claims. Based on these audits, two academic centers have settled with the IG for millions of dollars each. At least 40 other medical schools have been warned that audits are likely. Group practices and individual physicians have also become the target of IG audits.

While the Academy and other associations, including the American Medical Association (AMA), generally support the government's actions to combat Medicare fraud and abuse, there is concern that the IG's current audit program is unfair and possibly illegal.

The main issue raised during PATH audits is the documentation of physician presence during services provided by residents. The IG is penalizing teaching hospitals and physicians for not adhering to the physical presence requirements set forth in the July 1996 regulations. However, the audits cover the years 1990 through 1995, before the current rules went into effect. The IG states that the Health Care Financing Administration (HCFA) has always required physical presence by teaching physicians. In the 1996 regulations, however, HCFA admits that its past instructions on this issue were "vague," "controversial" and "not applied uniformly by all Medicare carriers."

Another issue raised during IG audits is the practice of "upcoding," especially for E/M services. Appropriate coding of E/M services presents a difficult issue for physicians. New codes for these services were introduced in 1992, which were not comparable to their predecessors. There was widespread confusion on the part of both physicians and Medicare carriers as to how to code E/M services. HCFA contributed to this confusion by not providing any consistent instructions on this issue for several years.

In 1995, HCFA and the AMA jointly published "Documentation Guidelines for Evaluation and Management ServicesóQuestions and Answers." This document stated that E/M codes would "no longer be excluded from the Medicare medical review system" as of Aug. 1, 1995. Despite the fact that the E/M documentation guidelines were not published until August 1995, the IG has reportedly applied these standards retroactively during audits.

Fairness dictates that penalties should be assessed for willful or knowing violations, which is impossible in these cases. In addition, the IG refuses to take into account the amount of inadvertent undercoding when determining how much the teaching hospital or physician owes the government.

The Academy is working with the AMA and other groups to address this situation. Because of the potentially huge sums of money the government may be able to collect through the fraud and abuse initiative, it is unlikely that Congress or the Administration will take any action to correct the unfair aspects of the audit program. In that case, we will consider the possibility of legal action against the Department of Health and Human Services. Reported by Laura Nuechterlein,
policy analyst, Academy's department of health policy. Background Total spending by the Department of Health and Human Services for anti-fraud, waste and abuse efforts in Medicare and Medicaid in fiscal year 1997 was $599 million. The programs include:

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