HealthLawProf Blog

Medicare Auditors Recover $700 Million in Overpayments

The Wall Street Journal reports that auditors have recovered nearly $700 million in Medicare overpayments to hospitals and other medical providers.  Theo Francis writes,

Auditors have recovered nearly $700 million in Medicare overpayments to hospitals and other medical providers in a half-dozen states under a controversial program that pays the auditing firms a portion of amounts they identify.

The program has drawn fire from health-care providers, and hospitals in particular, who call it overly aggressive and too confrontational. But the federal Centers for Medicare and Medicaid Services has supported the move and is in the process of expanding it nationally.

In all, the agency's recovery audit contractor program caught $1.03 billion of improper payments over about three years, primarily in New York, California and Florida, about $992.7 million of which was overpayments by Medicare. The audits also identified about $38 million that providers should have received but didn't. (Three states were added toward the end of the trial program, but accounted for only a small part of the recoveries, Medicare officials said.)

The program's expenses amounted to about 20 cents on the dollar, including $187.2 million paid to the audit firms, and medical providers successfully challenged about $60 million of overpayments identified by the auditors. In the end, about $694 million has been returned to the Medicare trust funds, the Medicare agency said. The auditors reviewed a total of $317 billion in claims.

"All in all, we're very happy with the results," said Tim Hill, the agency's chief financial officer and director of its office of financial management. "It returned a lot of money to the trust fund, particularly when you think that we're talking about three states."

Mr. Hill pointed to the low appeal rate -- about 14% of overcharges were appealed, and 4.6% of the total were overturned -- as evidence that the audits succeeded. "We know that we got the right answer," he said.

Hospital groups lobbied vigorously early this year to scrap or scale down the program, calling the contingency fees a "'bounty hunter' payment mechanism."

Instead, CMS is modifying some aspects of the program, requiring the audit firms to use clinically trained personnel, to make sure they evaluate medical necessity consistently with the rest of the agency's operations, and to communicate more detail about their audits with medical providers. The agency is also adding staff to oversee the program and arranging for providers to be able to track the progress of audits.

Mr. Hill also noted that the auditors aren't paid if their decisions are overturned, and that they are paid on the same terms whether they find overpayments by Medicare to providers, or underpayments that have shortchanged medical providers, who are then made whole.

Long-Term Fix Is Elusive in Medicare Payments

Criticism of the recent Medicare Bill approval continues as New York Times' writer, Robert Pear, reports that although cuts in Medicare payments to doctors have been blocked, nothing has been done to solve the problem that caused the cut in the first place.  Pear writes,

Congress has voted to block a cut in Medicare payments to doctors but has done nothing to solve the fundamental problem that caused the cut, and the issue will come back to haunt the next president and the next Congress, lawmakers and health policy experts say.

Democrats and Republicans agree that the formula for paying doctors is broken, but fixing it would be phenomenally expensive, they say. So Congress provides temporary relief from year to year, the same way it takes care of the Alternative Minimum Tax, which snares more middle-income families every year.

Older Americans are directly affected because they pay higher premiums when Medicare spends more on doctors.

Senator Edward M. Kennedy of Massachusetts made a surprise return to the Senate last week and helped Democrats pass a bill to rescind a 10.6 percent cut in Medicare payments to doctors. The White House says President Bush will veto the bill because it would also reduce subsidies paid to insurance companies that care for some Medicare beneficiaries.

Democratic leaders believe they have the two-thirds majority needed to override a veto. The bill was passed 355 to 59 in the House, and the crucial vote in the Senate was 69 to 30.

The bill would give doctors an 18-month reprieve. But it leaves in place the current system of paying doctors, based on a fee schedule that sets payment rates for 7,000 different services.

“The physician payment mechanism is hands down the most broken part of Medicare,” said Gail R. Wilensky, who was administrator of the Medicare agency under the first President Bush. “We desperately need a new way to reimburse doctors. I fear that the need for fundamental change will be kicked down the road once the latest crisis has passed.”

Senator John D. Rockefeller IV, Democrat of West Virginia, agreed. “We must find a long-term solution,” he said.

Mr. Rockefeller and other lawmakers are pleading with physicians’ groups to come forward with a comprehensive proposal. But that could be difficult because any new formula would almost surely produce winners and losers among doctors.

Dr. Thomas R. Russell, executive director of the American College of Surgeons, said, “We absolutely want to work with Congress to get this fixed in the next 18 months.”

“Doctors who are responsible for the rapid growth in certain areas, like testing and imaging procedures, need to bring those expenses under control,” Dr. Russell said.

But radiologists say it is unfair to hold them accountable for all the growth in imaging services because the services are usually ordered by other doctors, like orthopedic surgeons and internists.

Senator Debbie Stabenow, Democrat of Michigan, called the current formula severely flawed. She said it cut payments to doctors about 5 percent in 2002 and would have caused cuts every year since then if Congress had not intervened.

Senator John Cornyn, Republican of Texas, said, “Congress needs to step up with a permanent solution, not the kind of shameful temporary patches and fixes that require physicians to come hat in hand to Congress every 6 or 12 or 18 months.”

The fee schedule places a limit on payment for each service, from a routine office visit to brain surgery, but does not limit the volume or quantity of services. Medicare officials set payment rates each year, using a complex formula that sets overall goals for spending on doctors’ services.

When actual spending exceeds the goals, payments to doctors are supposed to be reduced. If Congress steps in to block a cut in one year, Medicare recoups the money by making deeper cuts in future years. Under the bill passed by Congress last week, doctors would face a cut of more than 20 percent in 2010.

The purpose of the formula is to control the growth of Medicare spending for doctors’ services. But individual doctors are not rewarded or penalized for their own performance.

Medicare provides the same annual update to doctors, regardless of whether they control costs and keep their patients healthy or provide poor care and perform unnecessary tests.

The Medicare formula, established by Congress in 1997, links spending on doctors to growth of the economy, measured by the gross domestic product. This formula works when the economy is booming, doctors say, but people need their services just as much in a recession.

The formula does not distinguish between appropriate and inappropriate increases in services billed to Medicare. Nor does it reflect the fact that many services can be done with new technology in doctors’ offices, rather than at hospitals.

Dr. Wilensky said that instead of paying for “little bitty units of service,” Medicare should provide a bundled payment to a doctor or group of doctors who care for patients with chronic illnesses like diabetes and congestive heart failure.

Many doctors want to eliminate the payment formula. They say their costs — for malpractice insurance, staff salaries and other expenses — are rising faster than Medicare payment rates.

But the Congressional Budget Office says if Congress repealed the formula and allowed payments to doctors to grow by the rate of medical inflation, the costs could be substantial: $65 billion in the first five years and nearly $200 billion in the next five years.

Obama Proposes Small Business Tax Credits for Health

Barack Obama proposes to give tax credits to small businesses that provide health insurance plans.  Small businesses would get a refundable credit of up to 50 percent on premiums paid on behalf of their employees, but will have to offer a quality health plan to all of their employees and cover a meaningful share of the cost of employee health premiums.  The Washington Post reports,

Democratic White House hopeful Barack Obama unveiled a proposal on Sunday to give $6 billion a year in tax credits to small businesses that provide health insurance plans.

In a speech to Latino voters of the National Council of La Raza in San Diego, Obama gave credit for the idea to Sen. Hillary Clinton, whom he defeated in a hard-fought primary for the Democratic nomination for November's election.

"Today, I'm announcing my plan to provide real relief for small business owners crushed by rising costs, an idea by the way that was championed by my friend Hillary Clinton, who's been leading the way in our battle to insure every American," Obama said.

A statement detailing the proposal said small businesses create, on average, more than 2/3 of net new jobs each year, but they pay on average 18 percent more for health premiums than their larger counterparts.

"They face unique challenges in providing health care to their employees, including higher administrative costs, lower bargaining power, greater price volatility and fewer pooling options," the statement said.

Under the plan, small businesses would get a refundable credit of up to 50 percent on premiums paid on behalf of their employees. To be eligible, small businesses will have to offer a quality health plan to all of their employees and cover a meaningful share of the cost of employee health premiums.

Obama's economic policy director Jason Furman said treasury officials would work out the exact details of what size firms would qualify and at what stage the credit would be phased out for medium-sized firms.

He said the cost would be covered by making so-called "biologic" drugs easier to bring to market in generic form, which would increase market competition and lower federal spending on prescription drugs which account for a growing share of the overall drug market.

It could also be covered by dedicating a portion of savings from reducing disproportionate share hospital (DSH) payments as already outlined in his healthcare proposals, the campaign said.

Pioneering Heart Doctor Michael DeBakey Dies at 99

The Washington Post and the New York Times report on the recent death of the renowned cardiovascular surgeon, Michael DeBakey.  John Porretto for the Washington Post writes,

When Dr. Michael E. DeBakey pushed forward with his groundbreaking research and maverick approach to medicine a half century ago, heart surgery was a medical marvel.

Today, in part because of his contributions, it routinely saves thousands of lives each day.

DeBakey, a world-famous cardiovascular surgeon who pioneered such now-common procedures as bypass surgery and invented a host of devices to help heart patients, died Friday night [July 11, 2008] in Houston. He was 99.

According to a statement issued early Saturday by Baylor College of Medicine and Methodist Hospital, DeBakey died of "natural causes" shortly after arriving at the hospital. The hospital's heart and vascular center bears his name.

DeBakey, whose career spanned more than 70 years, counted world leaders among his patients and helped turn Baylor from a provincial school into one of the nation's great medical institutions.

"Dr. DeBakey's reputation brought many people into this institution, and he treated them all: heads of state, entertainers, businessmen and presidents, as well as people with no titles and no means," said Ron Girotto, president of The Methodist Hospital System.

A tireless worker and stern taskmaster, DeBakey performed more than 60,000 heart surgeries during his career and had scores of patients under his care at any one time.

Among his patients were presidents Kennedy, Johnson and Nixon, former Russian President Boris Yeltsin, the Shah of Iran, King Hussein of Jordan, Turkish President Turgut Ozal and Nicaraguan leader Violetta Chamorro.

But he said celebrities didn't get special treatment on the operating table: "Once you incise the skin, you find that they are all very similar."

At an April ceremony in Washington in which DeBakey was awarded the Congressional Gold Medal, Congress' highest civilian honor, President Bush said the award placed the surgeon in the company of inventor Thomas Edison, Army doctor Walter Reed and Jonas Salk, who developed the polio vaccine.

"His legacy is holding the fragile and sacred gift of human life in his hands and returning it unbroken," Bush said at the time.

Born to Lebanese immigrants on Sept. 7, 1908, in Lake Charles, La., DeBakey his interest in medicine began while listening to physicians chat at his father's pharmacy.

"I always knew I wanted to be a doctor. I just didn't know what kind," DeBakey once said.

He received his bachelor's and medical degrees from Tulane University in New Orleans.

He recalled in 1999 that when he finished medical school in 1932, "there was virtually nothing you could do for heart disease. If a patient came in with a heart attack, it was up to God."

In 1932, while in school, DeBakey invented the roller pump, which became the major component of the heart-lung machine, beginning the era of open-heart surgery. The machine takes over the function of the heart and lungs during surgery.

It was the start of a lifetime of innovation. DeBakey would go on to help pioneer the effort to develop artificial hearts and heart pumps to assist patients waiting for transplants, and help create more than 70 surgical instruments.

DeBakey was the first to perform replacement of arterial aneurysms and obstructive lesions in the mid-1950s. He later developed bypass pumps and connections to replace excised segments of diseased arteries.

In early 2006, at age 97, DeBakey underwent surgery for a damaged aorta _ a procedure he developed.

"There is no question that he was one of the pioneers of cardiovascular surgery in the last half of the 20th century," Dr. Denton Cooley, president and surgeon-in-chief at the Texas Heart Institute in Houston and a longtime DeBakey rival, said Saturday.

Cooley said one of DeBakey's greatest legacies is "he influenced so many students to pursue careers in cardiovascular surgery."

DeBakey's former colleagues were among those who gathered Saturday at the still-uncompleted DeBakey Library at the Baylor College of Medicine to remember him.

"He took risks that others might not take to advance medicine and to prove the value of the procedures," said Dr. Bobby R. Alford, chancellor of the Baylor College of Medicine. "He had impeccable judgment."

DeBakey served as chairman of the President's Commission on Heart Disease, Cancer and Stroke during Johnson's administration and helped establish the National Library of Medicine. He was the author of more than 1,000 medical reports, papers, chapters and books on surgery, medicine and related topics.

In 1953, he performed the first Dacron graft to replace part of an occluded artery. In the 1960s, he began coronary arterial bypasses.

In 1962, DeBakey received a $2.5 million grant to work on an artificial heart that could be implanted without being linked to an exterior console. Four years later, he was the first to successfully use a partial artificial heart _ a left ventricular bypass pump.

Dr. Christiaan Barnard in South Africa performed the first human heart transplant in history in late 1967. In the United States, DeBakey was among the first to begin performing the transplants, but death rates were high because the recipients' bodies rejected the new organs.

The advent of a new anti-rejection drug, cyclosporine, gave new impetus to organ transplants in the 1980s. In 1984, DeBakey performed his first heart transplant in 14 years.

In the late 1990s, DeBakey took an active role in creating the Michael E. DeBakey Heart Institute at Hays Medical Center in Hays, Kan.

DeBakey's first wife, Diana Cooper DeBakey, died of a heart attack in 1972. He is survived by his second wife, Katrin Fehlhaber, their daughter, and two of his four sons from his first marriage.

Click here to read Lawrence K. Altman's article for the New York Times. 

Psychiatric Group Faces Scrutiny Over Drug Industry Ties

The New York Times reports on the uneasiness felt by many regarding paid consulting arrangements between doctors and drug companies.  Many people fear that these arrangements lead to bias within the industry and impede advancement.  The American Psychiatric Association is being demanded to give an accounting of its financing and university officials are monitoring payments by drug companies to doctors more closely.  Benedict Carey and Gardiner Harris write,

It seemed an ideal marriage, a scientific partnership that would attack mental illness from all sides. Psychiatrists would bring to the union their expertise and clinical experience, drug makers would provide their products and the money to run rigorous studies, and patients would get better medications, faster.

But now the profession itself is under attack in Congress, accused of allowing this relationship to become too cozy. After a series of stinging investigations of individual doctors’ arrangements with drug makers, Senator Charles E. Grassley, Republican of Iowa, is demanding that the American Psychiatric Association, the field’s premier professional organization, give an accounting of its financing...

“I have come to understand that money from the pharmaceutical industry can shape the practices of nonprofit organizations that purport to be independent in their viewpoints and actions,” Mr. Grassley said Thursday in a letter to the association.

In 2006, the latest year for which numbers are available, the drug industry accounted for about 30 percent of the association’s $62.5 million in financing. About half of that money went to drug advertisements in psychiatric journals and exhibits at the annual meeting, and the other half to sponsor fellowships, conferences and industry symposiums at the annual meeting.

This weekend in Chicago, the psychiatry association’s board will meet behind closed doors, in part to discuss how to respond to the increasingly intense scrutiny and questions about conflicts of interest.

“With every new revelation, our credibility with patients has been damaged, and we have to protect that first and foremost,” said Dr. Steven S. Sharfstein, a former president of the association and now president of the Sheppard Pratt Health System in Baltimore. “I think we need to review all arrangements between doctors and industry and be very clear about what constitutes a conflict of interest and what does not.”

One of the doctors named by Mr. Grassley is the association’s president-elect, Dr. Alan F. Schatzberg of Stanford, whose $4.8 million stock holdings in a drug development company raised the senator’s concern. In a telephone interview, Dr. Schatzberg said he had fully complied with Stanford’s rigorous disclosure policies and federal guidelines that pertained to his research.

Blocking or constraining researchers from trying to bring medications to market “will mean less opportunities to help patients with severe illnesses,” Dr. Schatzberg said, adding, “Drugs that are helpful may not be developed by big pharmaceutical companies, for a variety of reasons, and we need some degree of communication between academia and industry” to expand options for patients.

Commercial arrangements are rampant throughout medicine. In the past two decades, drug and device makers have paid tens of thousands of doctors and researchers of all specialties. Worried that this money could taint doctors’ research plans or clinical judgment, government agencies, medical journals and universities have been forced to look more closely at deal details.

In psychiatry, Mr. Grassley has found an orchard of low-hanging fruit. As a group, psychiatrists earn less in base salary than any other specialists, according to a nationwide survey by the Medical Group Management Association. In 2007, median compensation for psychiatrists was $198,653, less than half of the $464,420 earned by diagnostic radiologists and barely more than the $190,547 earned by doctors practicing internal medicine.

But many psychiatrists supplement this income with consulting arrangements with drug makers, traveling the country to give dinner talks about drugs to other doctors for fees generally ranging from $750 to $3,500 per event, for instance.

While data on industry consulting arrangements are sparse, state officials in Vermont reported that in the 2007 fiscal year, drug makers gave more money to psychiatrists than to doctors in any other specialty. Eleven psychiatrists in the state received an average of $56,944 each. Data from Minnesota, among the few other states to collect such information, show a similar trend.

In both states, individual psychiatrists are not top earners, but consulting arrangements are so common that their total tops all others. The worry is that this money may subtly alter psychiatrists’ choices of which drugs to prescribe.

An analysis of Minnesota data by The New York Times last year found that on average, psychiatrists who received at least $5,000 from makers of newer-generation antipsychotic drugs appear to have written three times as many prescriptions to children for the drugs as psychiatrists who received less money or none. The drugs are not approved for most uses in children, who appear to be especially susceptible to the side effects, including rapid weight gain.

Senator Grassley’s investigations have not only detailed how lucrative those arrangements can be but have also shown that some top psychiatrists failed to report all their earnings as required.

After The Times reported on such an arrangement involving Dr. Melissa P. DelBello of the University of Cincinnati, Mr. Grassley asked the university to provide her income disclosure forms and asked AstraZeneca, the maker of the antipsychotic Seroquel, to reveal how much it paid her.

In scientific publications, Dr. DelBello has reported working for eight drug makers and told university officials that from 2005 to 2007 she earned about $100,000 in outside income, according to Mr. Grassley.

But AstraZeneca told Mr. Grassley it paid her more than $238,000 in that period. AstraZeneca sent some of its payments through MSZ Associates, an Ohio corporation Dr. DelBello established for “personal financial purposes.”

The University of Cincinnati agreed to monitor those payments more closely.

In early June, the senator reported to Congress that Dr. Joseph Biederman, a renowned child psychiatrist at Harvard Medical School, and a colleague, Dr. Timothy E. Wilens, had reported to university officials earning several hundred thousand dollars apiece in consulting fees from drug makers from 2000 to 2007 when in fact they had earned at least $1.6 million each.

Another member of the Harvard group, Dr. Thomas Spencer, reported earning at least $1 million after being pressed by Mr. Grassley’s investigators. The Harvard psychiatrists said they took conflict-of-interest policies seriously and had abided by disclosure rules.

In late June, after Mr. Grassley singled out Dr. Schatzberg, Stanford disputed some of the numbers in the report and has denied that Dr. Schatzberg violated any research rules devised to police such conflicts.

In an interview on Wednesday, Dr. Nada L. Stotland, president of the psychiatric association, said the group had studied Mr. Grassley’s letter and Stanford’s response and agreed with Stanford. Dr. Schatzberg will take over as president of the association as planned, she said.

“The larger issue here is that there’s a revolution going on” in how medicine handles industry money, said Dr. Stotland, a psychiatrist at Rush Medical College in Chicago. “That’s good, that’s what we need, and I believe we’ve been on the cutting edge of that revolution in many ways.”

Dr. Stotland said that the association began reviewing the income it received from pharmaceutical companies last March, to identify potential conflicts. Doctors and academic researchers generally worked at arm’s length from industry until the early 1980s, when Congress passed the Bayh-Dole Act. This legislation encouraged closer collaboration between researchers and industry to bring products to market more quickly. The act helped foster the growth of the biotech industry, and soon professors and universities were busy obtaining patents and building relationships with industry.

Some psychiatrists have long argued that consulting with a company — to help design a rigorous drug trial, for instance — benefits patients, as long as the researcher has no financial stake in the product and is not paid to speak about the drug to other doctors, like a traveling pitchman.

Others say industry and academic researchers are now so deeply intertwined that exposing doctors’ private arrangements only stokes suspicion without correcting the real problem: bias.

“Having everyone stand up like a Boy Scout and make a pledge isn’t going to quell suspicion,” said Dr. Donald Klein, an emeritus professor at Columbia, who has consulted with drug makers himself. “The only hope to rule out bias is to have open access to all data that’s produced in studies and know that there are people checking it” who are not on that company’s payroll.

Studies have shown that researchers who are paid by a company are more likely to report positive findings when evaluating that company’s drugs. The private deals can directly affect patient care, said Dr. William Niederhut, a psychiatrist in private practice in Denver who receives no industry money.

Dr. Niederhut said company-sponsored doctors had spread the word that new and expensive drugs were better in treating bipolar disorder than lithium, the cheaper old standby treatment.

“It’s a sales pitch, and now it’s looking like a whole lot of people would have done better if they’d started on lithium in the first place,” Dr. Niederhut said in a telephone interview. “The profession absolutely has to come clean on these industry deals, and soon.”

Tighter rules, stronger statements and more debate may not make much difference, if Mr. Grassley’s findings are any guide. Universities have rules requiring that faculty members disclose their outside income so that conflicts of interest in research or patient care can be managed. But some of the psychiatrists named in the investigations apparently ignored the rules.

“I think we may be coming to a point where hospitals and medical schools have to get serious about sanctioning,” said Dr. Paul S. Appelbaum, director of the division of psychiatry, medicine and the law at Columbia. “You can suspend doctors’ privileges, or suspend their right to treat patients; both have a huge impact on income and career. But if you’re serious about these disclosure policies, you have to be willing to back them up.”

As Outbreak Affects 1,000, Experts See Flaws in Law

The New York Times reports on the nation's salmonella outbreak and the urge for better laws that will allow people to trace contamination.  Bina Venkataraman writes,

More than 1,000 people in 41 states and the District of Columbia have now been sickened in the nation’s salmonella outbreak, in what officials said Wednesday [July 9, 2008] was the largest food-borne outbreak in the last decade. And some food safety experts this week tied problems in tracing the source of the contamination to what they say are shortcomings in the Bioterrorism Act of 2002.

Federal investigators have now linked at least some of the outbreak to fresh jalapeños, Dr. Robert Tauxe of the Centers for Disease Control and Prevention said, though they have not ruled out tomatoes.

But officials have still not pinpointed the source of the contamination. Nor do they know the country or state where the tainted produce was grown, despite a rule issued by the Food and Drug Administration under the bioterrorism law that was intended to give federal officials a way to respond immediately to threats to the nation’s food supply.

The rule requires importers, processors and distributors to keep track of where they buy produce and where it goes. A major hurdle facing investigators in this outbreak, however, is that processors frequently repack boxes of tomatoes to meet a buyer’s demands. In doing so, officials said, they are not required to record the tomatoes’ farm, state or even country of origin.

“The purpose of the recordkeeping provision of the Bioterrorism Act was to support going back to the origin of food after people have gotten sick when you are trying to find out how the biological agent got there,” said Michael Taylor, a professor at the George Washington University and a former F.D.A. official. “But the provisions are of little or no value with respect to trace-backs of fresh produce because of the amount of shoe leather and time it would take.”

The rule requires only that produce handlers keep track of food one step back and one step forward in the supply chain and does not apply to retailers or growers. Because the rule does not specify the format for records, investigators are sifting through a hodgepodge of paper trails to identify the source of the contaminated produce.

“It’s clear that the F.D.A. is not equipped to deal with a trace-back of the magnitude that they are dealing with right now,” said Mike Doyle, director of the center for food safety at the University of Georgia.

Several lawmakers and consumer advocates are calling for a system that requires the industry to track the entire history of food products. Some groups, like the Produce Marketing Association, said they would support national regulation.

Dr. David Acheson, the agency’s associate commissioner for foods, said in a telephone interview on Monday that the F.D.A. lacked authority to require full trace-back capability, adding, “It’s the industry’s responsibility to put that kind of system in place, not ours.”

But Dr. David A. Kessler, the F.D.A. commissioner in the Clinton and first Bush administrations, said the agency has the authority to require the industry to trace produce as it travels from “farm to table,” but has lacked “the impetus” to do so.

“The technology exists to trace the entire chain of a food product,” Dr. Kessler said. “The agency needs to require the industry to put into effect mechanisms to do full trace-back. That regulation could be put in place in months, not years.”

Representative Diana DeGette, Democrat of Colorado, said Congress needed to expand the agency’s authority to “trace contamination to the source.” Ms. DeGette has proposed legislation directing the agency to establish a tracing system.

California requires tomato growers to be able to trace their product from the marketplace to the field, which most do using electronic systems that track codes on boxes, said Jay Van Rein of the California Department of Food and Agriculture.