Billions in Fraud and Waste in Health Care

How to Avoid Being Collateral Damage in the Effort to Pay for Reform.

Health care reform efforts have been front page news for months. At the heart of the debate over the nature, scope and details of reform efforts has been the struggle to find a way to pay for the proposed changes. Aside from looming specter of further cuts in reimbursement, physicians and other providers should take careful note of a troubling bit of rhetoric that has worked its way into the debate - that reform efforts can be paid for in large part by eliminating fraud and waste.

Some reform proponents have posited that there are hundreds of billions of dollars of fraud and waste in the health care system. Lewis Morris, Chief Counsel of the Office of Inspector General, has stated on more than one occasion that fraud enforcement should be a central component of health care reform as a cost-containment strategy. He has cited statistics from the Federal Bureau of Investigations that estimate that fraudulent billings to public and private payors account for 3 to 10 percent of healthcare spending or $75 to $250 billion.

Few would argue that fraud and waste in health care should not be reduced. However, cold statistics without context serve to inflame passions without necessarily addressing the issues. To date, there have been many efforts aimed directly or indirectly at reducing perceived fraud and waste in the health care system. From the Anti-Kickback Law to the Stark Law to the False Claims Act, the federal government has been quite active in attempting to reign in perceived fraud and waste in health care. Opinions vary widely as to how effective these efforts have been. However, most would agree on one point; that these past and current efforts have created a complex legal and regulatory structure for physicians and health care providers. Indeed, an entire industry exists to help physicians and other providers comply with the myriad of complicated and hyper-technical rules that govern the way that health care is delivered.

Recently, some in the regulatory compliance industry have seized the current rhetoric to fuel business using fear as a marketing tool. This article is intended to remove some of the hype and help physicians and providers understand where their resources should be focused. It is true that the federal government, state governments and private insurance industry are increasing scrutiny on coding and documentation practices of physicians and other providers. Additionally, at the same time physicians and other providers are being asked to take other steps to implement new technologies and other practices aimed at improving quality and efficiency. This is a daunting challenge at a time of great uncertainty in the health care industry, and physicians and other providers need to understand what is expected of them in order to properly allocate scarce resources.

It should not be news to any physician or other health care provider that government and private payors have been steadily increasing and continue to increase their efforts to reduce fraud and waste. The federal government has or will soon implement the Recovery Audit Contractor ("RAC") program, the Medicaid Integrity Program ("MIP"), and the Health Care Fraud Prevention and Enforcement Action Team ("HEAT"). As a result, many unscrupulous physicians and other providers that have engaged in egregious and illegal activities have been caught and prosecuted. However, the increase in enforcement activity means the vast majority of physicians and other providers, those that are not intentionally engaging in illegal activities, are likely to have their coding and documentation practices come under scrutiny at some point.

What this means to physicians and other providers is that they must develop and implement an effective coding and documentation compliance plan. The primary focus of the compliance plan should be to assure that the physician or provider bills only for properly coded, medically necessary services that were actually provided and for which there is complete and accurate documentation to support the coding. A compliance plan that accomplishes these objectives will yield many positive results. First and foremost, the physician or provider will be far less likely to fit the profile or profiles that many of the new fraud detection programs are developing and using to select targets for audits and investigation. The RAC program is using highly sophisticated software to mine billing data to detect fraud. An effective compliance plan will help minimize the likelihood that a physician or other provider will be identified by the software as a statistical outlier and potential target.

Next, to the extent that a physician is audited or targeted for an investigation, the physician or other provider can more effectively participate in the audit or investigation on the front end and limit the nature and scope of the inquiry. Many audits and investigations begin with a review of a relatively small sample of records from a physician or other provider. An effective compliance plan will help the physician or other provider demonstrate compliance thereby limiting the scope of the review. Furthermore, most coding and documentation experts agree that physicians and providers are often under coding for the services they are providing or engaging in other behavior that is actually decreasing the amount of legitimate revenue the physician or provider could be generating.

Many physicians and other providers have compliance plans while others do not. Whether developing and implementing a new compliance plan or improving an existing compliance plan, the key to effective compliance program is knowledge. An effective compliance plan cannot be purchased at a store and placed on a shelf at the office. Every person involved in the delivery, billing, coding and documentation of medical services must be educated and trained on an ongoing basis. Compliance is a process and a culture, not a one-time event or a book on a shelf. The process must be monitored and evaluated periodically and modified as necessary.

There are many resources available that can assist physicians and providers in developing, implementing and improving an effective compliance plan. The resources include seminars, books, consultants and attorneys. Physicians and providers should avail themselves of all of these resources to assist them in the process of making effective compliance a part of their culture so that they do not become collateral damage in the health care reform process.

James D. Egleston