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The Systemic Nature of Medicare Fraud

testosteronepit's picture




 

Wolf Richter   www.testosteronepit.com

It’s the kind of Medicare fraud case that makes your skin crawl. But the FBI is finally getting serious. California Watch reported today that federal agents interviewed the patient who was at the core of an investigative report in mid December. The patient, a diabetic, who was treated for acute kidney failure in 2010 at the Shasta Regional Medical Center in Redding, CA, didn’t know that the hospital would bill Medicare for the treatment of a disease she’d never heard of: kwashiorkor.

The often fatal illness is caused by severe malnutrition. Its symptoms include a distended belly and stick-thin arms. It afflicts children during famines in Africa. The patient was overweight. But by mentioning kwashiorkor on its billing documents, according to California Watch, the hospital boosted its Medicare reimbursement from $4,708 to $11,463—a 143% jump in revenue.

The temptation was just too great. The hospital was bought in 2008 by Prime Healthcare Services, a chain based in Ontario that owns 14 hospitals and a medical group in California. In 2008, the hospital billed Medicare for eight cases of kwashiorkor. In 2009, it billed Medicare for 303 cases. And in 2010, 727 cases. Stunningly, 19.4% of all its Medicare patients were suffering from kwashiorkor.

Why did Medicare allow this to happen? Wasn’t anybody paying attention? Well, actually no. Because Medicare has a systemic problem. It lacks, inexplicably, the first line of defense that every insurance company has used for decades: computerized analysis of all claims to detect abnormalities. Instead, Medicare relies on the honor system. It expects healthcare providers to forgo easy profits for the sake of “honor,” whatever that means in corporate America. So claims are paid automatically. Not even 5% are audited. And after-the-fact federal crackdowns, if they happen at all, merely cause fraud to shift to a different area.

Another systemic problem is Medicare’s bonus system. It heaps additional payouts on providers who treat patients diagnosed with certain dangerous diseases, such as kwashiorkor, blood infections, and acute heart failure. Providers simply add the billing codes to their Medicare bills and get paid extra. It’s found money.  

So a special industry has sprouted up around Medicare. California Watch, which claims to have analyzed more than 50 million Medicare patient records that it obtained through the Freedom of Information Act, identified thousands of instances where Prime Healthcare Services billed Medicare for the treatment of rare conditions. Its Alvarado Hospital Medical Center in San Diego already appears to be under investigation. At its Chino Valley Medical Center in San Bernardino County, a whopping 35.2% of the Medicare patients were treated for acute heart failure, six times the average rate. The hospital chain meanwhile claims its billing statements are accurate.

No one knows the amount of improper payments. The Office of Management and Budget estimated it at $47.9 billion in 2010, or about 9% of total Medicare spending. That much money cannot be spread over just a few “bad apples.” Fraud is built into the system. And given the powerful lobby of healthcare providers, one might wonder if Congress will ever step in to force a change. For just how fed up Americans are with Congress, dive into some irony and read.... The Most Disparaged Profession.

Medicare cannot afford to be lax. The system is facing $36 trillion in unfunded obligations under Part A—over an infinite horizon which is a pretty long time, but it’s still terrifying (though less terrifying than the current budget deficits). As baby boomers retire, the ratio of workers to beneficiaries will decline from 3.9 currently to 2.4 by 2030. Meanwhile, Medicare spending is expected to grow 7% per year. The system is on collision course with reality.

Everybody agrees: something needs to be done. Demographics can't be changed easily. Adjusting contributions and benefits is a painful procedure. And fixing a system that encourages fraud on a massive scale is hard because so many businesses benefit from it, though technically, it would be relatively simple. Governments aren’t good at shutting off the money spigot when things go seriously awry. There is just too much vested interest. Exhibit A: California where a hullabaloo has re-broken out over funding the skyrocketing costs of..... California's High-Speed Rail To Nowhere.

 

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Tue, 01/10/2012 - 07:33 | 2049609 slowimplosion
slowimplosion's picture

As someone who works in the Medicare billing industry, I'd have to say that "encourages fraud" is a bit hyperbolic.  There may not be the safeguards in place to detect this sort of thing (outright lying) but there are a lot of rules/systems in Medicare that are there for the sole reason as to obfuscate how certain payments (for example Outliers) are calculated to make it nearly impossible to game the system.

 

One thing is clear, like all financial fraud while safeguards and regulations are important, just as important is SENDING FRAUDSTERS TO JAIL, not just clawing back a few dollars.

 

When LONG TERM PRISON is a real consequene, this shit will slow down rapidly.

Tue, 01/10/2012 - 07:01 | 2049575 IdioTsincracY
IdioTsincracY's picture

Another 'Bash The Government' article ... yea!!!

However: Healthcare fraud affects public and private insurance alike:

"“What is absolutely clear from virtually every reliable source on the subject is that healthcare fraud is a systemic problem affecting public and private insurers alike, in the individual market, the employer-sponsored group market, and public programs.”

Anyway ... Health care fraud widespread -- in public and private sectors :

"...While the public is more aware of Medicare and Medicaid fraud because the government is required to report it to taxpayers, "perhaps the most striking examples of fraud are those that involve the private insurance industry itself,"

Of course fraud, generally, is not committed by the Government or the public at large, but by the very private entities that shoud be the model for the public sector:

"Researchers pointed to a January settlement by UnitedHealth Group, totaling $450 million, over allegations that the insurance firm manipulated out-of-network prices for physician services, resulting in an estimated 10% to 28% increase in costs. The Litigation Center of the American Medical Association and State Medical Societies, along with other physician organizations, had sued United, which denied any wrongdoing."

Must be because of over-regulation .... let's do away with everything Public and everything will be great!!!

Like the good ole' times

 

Tue, 01/10/2012 - 04:27 | 2049475 aleph0
aleph0's picture

FWIW

Corbett Report .... excellent & serious reporter

Scientists Weaponize Bird Flu - Governments Remain Biggest Sponsors of Bioterror

http://www.youtube.com/watch?v=JzU-G0xhwdQ

5 mins.

Absolutely ridiculous that "we the people" allow these things to continue .

Tue, 01/10/2012 - 03:43 | 2049432 Rampage
Rampage's picture

Dr Callie Herpin ripped off Medicare for millions in fraudelent wheelchairs and THAT scam continues today.  How do you think all those TV commercials are paid for ? 

Herpin and her ghettofab office team also managed to get thousands of narctoic prescriptions and hundreds of gallons of addictive promethazine "syrup" on the streets before somebody finally noticed something. 

http://www.johntfloyd.com/news/july/10b.htm

 Medicare is already a huge free for all, and the more nationalized medical care becomes, the larger in scale these ripoffs will be. 

Tue, 01/10/2012 - 03:36 | 2049422 HungrySeagull
HungrySeagull's picture

It is easier to walk into a auto shop, learn what it takes to replace a radiator and get it done.

Walk into the ER with a bad Acute boo boo... and you just incurred at least 1000 dollars.

My last visit not of my choosing was around 5000 dollars. They did a good job, however I should have been more aware of what I was putting into my mouth that month to keep from having that in the first place.

Have you ever seen the processed CRAP that people cart out of walmart>

Tue, 01/10/2012 - 03:02 | 2049385 Flatchestynerdette
Flatchestynerdette's picture

As someone who is in the medical business and has to deal with medicare? I'd like to know where I sign up for these items that are fraudulent. I must be totally dumb or be totally honest because I've been through an audit and they didn't find a thing wrong. Why? Because we're not a hospital, we're not a specialty test facility, we are doctors who take care of one area of the body. If we suddenly started filling in codes for something that paid $500 per patient and was at a different area of the body? Our licenses would be yanked for business and the doctor's too. I don't know how hospitals get away with shit like this but its the MAJOR reason why your local doctor is closing his/her doors. Why you ask? Because when the hospital HIRES the doctor it hires them at the top end of the wage scale and gives them all the goodies because they can afford to. They're charging Medicare for testing and fraudulent coding that pays for the overpaid doctor's salaries.

 

Your regular doctor who has an office with staff? He's making 40% less than the doctor at the hospital and he has to pay overhead, his staff, his fixed costs, his liabilities, etc. and he's/she's not screwing medicare or they'd be doing a colonoscopy without anesthesia on that doctor.

Blame the hospitals and the every other corner sleep center/MRI center/blood testing center.

Don't blame your neighborhood doctor that you've been seeing for the past 10 years and your bills are always the same.

Tue, 01/10/2012 - 02:18 | 2049322 msjimmied
msjimmied's picture

Prime Healthcare Services... "the hospital billed Medicare for eight cases of kwashiorkor. In 2009, it billed Medicare for 303 cases. And in 2010, 727 cases. Stunningly, 19.4% of all its Medicare patients were suffering from kwashiorkor."

Why are you guys railing against Medicare? Like someone else commented, there are no doctors mentioned here, none of the nurses, none of the people that work hard to keep us alive. It's the faceless corporations that have injected itself between the doctors and the patient, and forged that link from them to the deep pocketed government. Out tax system is an honor system too. Heck, even your library books, or the fare at the metro. Office supplies where you work, sharing a limited potluck dinner. Damn it, you know the right thing to do. So what do we have here? We are talking about thieves, and liars and cheats, people who have abused our system. Focus on perps please, not the victim.

Tue, 01/10/2012 - 03:28 | 2049416 Questan1913
Questan1913's picture

Prime Healthcare Services is on the "need not audit" list.  Reread the article.  Twenty percent of its Medicare patients were suffering from starvation yet that raised no red flags at Medicare?  Whoever approved that scheme at PMS KNEW with absolute certainty that those billings would not be questioned.

Tue, 01/10/2012 - 02:08 | 2049297 Questan1913
Questan1913's picture

So it is now confirmed that Medicare which operates in the land of the ethically challenged relies on an "honor system"?  If this is true, the fraud rate has to be  a large fraction of Medicares annual payout which would account for the soaring expense of this program.  If true this has to be intentional misfeasance.  Yet another cesspool of criminal fraud resting on collusion between government and an industry?  Where does this end?  Bill Black accasionally speaks of criminogenic environments; might the whole country now be one?  Really, how vast is the rot in this country's institutions?  Here is yet another example of wealth being funneled upward, this time under cover of helping the ill.

Tue, 01/10/2012 - 02:04 | 2049293 Below Zero
Below Zero's picture

It isn't just Medicare, it's the whole corrupt medical system. The AMA has limited the amount of medical students for generations in order to create a shortage. The drug companies produce almost worthless drugs and charge Americans 2- 3 times what they charge elsewhere. The big game is getting Medicare to cover the near useless drugs. The insurance companies are in on the scam. The whole system is designed to loot as much as possible from the American public and no one dares to stop the crooks. Somehow, in modern times, taking the Hippocratic Oath makes it OK to financially loot the patients.

Tue, 01/10/2012 - 05:50 | 2049516 Reformed Sheep
Reformed Sheep's picture

The big game is getting Medicare to cover the near useless drugs.

Yeah - like "Restless Leg Syndrome" - like WTF!?


Tue, 01/10/2012 - 01:57 | 2049278 non_anon
non_anon's picture

I used to be an office manager for a podiatrist and did all the jobs, including medical claims. One instance, AARP would always pay us short a penny on our claims. I called AARP up and asked why they shorted us on all our claims by a penny, the AARP rep. said it was just a penny, but I stated add those pennies up, no answer to that. The whole system is rife with fraud and obamacare is not the cure.

Tue, 01/10/2012 - 01:43 | 2049237 malek
malek's picture

It was just a honest mistake. TurboMed made me do it.

Tue, 01/10/2012 - 01:34 | 2049205 Elvis is Alive
Elvis is Alive's picture

It is funny how everyone blames doctors for the health care system even in cases like this where there wasn't even a doctor mentioned. People must think RNs, LVNs, PTs, and CRNAs don't cost anything. Most hosptial doctors work on salaries these days and some billing person probably put in kwashikor by mistake, saw the money flow, and kept using it.

The sheeple want to believe that if not for lawsuits, doctors would be these monsters who would totally screw them over. Well, the cat is out of the bag on that one too. Medical care is better and cheaper in foreign countries without the number of lawsuits we have here. The head of Medicare estimates defensive medicine costs Medicare 9% of its annual budget which if applied to the whole health care budget amounts to $225 BILLLION per year. The sheeple need to pull their head out of their ass and ask which is more important: lawsuits or care?

You don't have a right to insurance, but you have a right to sue? How screwed up is that? Oh, and you can sue even if you don't pay your bill.

As for fraud, the government's system is a joke. There was a Hospice patient I saw once that was "wasting away". For a patient to be on Hospice, they are supposed to have a prognosis of <6 months. Hospice gets $150 or so per day for every day this patient is on treatment, and this patient was on for six months at a cost of $25,000. Anyway, this patient at the time weighed 150 lbs which was heavier than my wife.  I asked that the patient be re-evaluated (code for "you Hospice assholes are committing fraud"), and they kept the patient on the service because she lost one lb that month.

So after that I wrote in the patient's chart that I would bet anyone in the Hospice $1000 that the person would not die of "wasting away" in the next six months. The Hospice finally took the patient off service but told everyone that they could how "unprofesional" I was. That pissed me off, and I turned the Hospice in to Medicare fraud. This was in 2006. In the end, the patient lived another three years.

Now here is where it gets funny. This complaint was somehow shipped out to some private firm. I was told it was being investigated and never heard a word back. I then opened up a USA Today and there on the front page was an investigation about Medicare fraud and hospice. The year I read this? 2011!!

 

 

 

 

 

 

 

 

Tue, 01/10/2012 - 00:55 | 2049136 adr
adr's picture

It isn't just Medicare, but Medicaid and all insurance programs as well. The only system that works is direct pay, patient to doctor. Everything else is a scam. You think it really costs $38k to deliver a baby? There is no way in hell we received $38k worth of care when my son was born. An actual doctor was only there for 15 minutes. The quality of care is atrocious and the service is terrible and nearly every hospital. 9 out of 10 times you'll get a foreign doctor that scored below 50 on the MCAT but made it through medical school anyway to fill a quota. Fraud isn't just rampant it is on every bill. They bill you for items they never use, purposely let you sit for  hours before you're discharged just to pad the bill, and send in multiple doctors just so they can bill for each one. The fucking hospitals don't even have doctors working for them anymore, the doctors all work for outside firms that bill you thousands along with the hospital. Just a room costs $1500 an hour. FUCK EVERYONE IN THE MEDICAL PROFESSION!!! You all know that you are the problem because greed rules medicine over simply providing  care. I went to the ER in 1992 and was there for two hours for a broken bone, the bill was $180. Today the same bill is closer to $5000.  A trip to the hospital in 2002 for a kidney stone was $4400, I went again last year, $8600!!!!! Care to explain that doctors? You can't justify that cost. To top it off my sister in law tells me her office bills insurance for the doctor even if the patient was only seen by a nurse. Why? well they only get $90 if a nurse sees a patient but $160 if they see the doctor. I told her the office is commiting insurance fraud and every one of them sould be arrested or at least have their licenses revoked. Her reply was, we need the extra money to pay employees. Well maybe she could make due with $60k instead of the $100k she's paid.

Tue, 01/10/2012 - 00:13 | 2049026 gwar5
gwar5's picture

Medicare is nothing but a socialist PONZI scheme and the liars are going to break their promises to the elderly by denying them treatment, which is nothing more than unassisted euthanasia by the government who is then happy to snatch up estates which are not depleted by expensive end-of-life care.  Beware the CFPB, which is run by the FED to track everyone's assets in real time, in case anyone is thinking they might want to seek treatment overseas.

 

"Socialism is nothing but false promises told by politicians to gullible people who want to hear that they can get something for nothing. When the broken promises expose the lies, as always happens, there is never any shortage of scapegoats for the politicians to blame."  -- Thomas Sowell



 

Tue, 01/10/2012 - 00:12 | 2049022 toadold
toadold's picture

On the other hand more and more Doctors and small clinics will not take Medicare paitents, epecially those who do family practice.  There was a story a while back about a family practice doctor who not only stopped taking Medicare but stopped handling inurance also.  She cut her prices and does a cash business.  She said that getting rid of the expense and time compsution of handling forms and telephone calls has enabled her to make more money and spend more time with patients.  There is also an online service that is helping US doctors relocate overseas so they don't have to put up with the paper crap and reportage required in the US and don't have to have the enoumous amonts of liability insurance. 

Tue, 01/10/2012 - 00:03 | 2048993 Peter Pan
Peter Pan's picture

I have news for you. Government pays too much for everything and in particular for politicians.

Mon, 01/09/2012 - 23:50 | 2048945 Ron Real
Ron Real's picture

Fraud, mismanagement, incompetance, laxity in the health field. It doesn't start there; it doesn't stop there.In this one instance think how many people there are who are complicit, who know what is going on and make it happen, let it happen, or just ignore that it happens.

Mon, 01/09/2012 - 23:49 | 2048941 ucsbcanuck
ucsbcanuck's picture

To clarify that's Ontario, California

http://www.primehealthcare.com/

Truly disgusting

Mon, 01/09/2012 - 23:49 | 2048940 albertchampion
albertchampion's picture

there were the old days. when you went to a doc. he billed you. you paid him.

then lyndon johnson wanted to take care of his gangster friends in the medical business[study on the houston medical center, for instance. follow that money].

for years, the american medical association had obstructed efforts to "socialize", "federalize" health care.

but lyndon explained to them how the insertion of the state into the administration of health care was going to make doctors wealthy beyond their imagining. principally by eliminating the direct "pay for fee" services between the physician and the patient.

the stars of amazingingly beyond the norm enrichment swayed the AMA. and it rolled over for lying lyndon.

and what did lying lyndon create? the most larcenous health care system imaginable. and he took care of all his gangster friends  - the hospital construction industry, the pharmaceutical industry that was allowed to market usg research for its profit, and the suddenly enriched physicians who would be contributing more to the irs.

oh, lyndon had lots of laughs over that bit of scamstering.

i like to think of him sitting back in the hotel suite where the houston gangsters played poker with your money. george and herman brown, gus wortham. to name but a few.

 

 

Mon, 01/09/2012 - 23:32 | 2048868 Pemaquid
Pemaquid's picture

Stuff like this makes my blood boil! That is our money they are stealing! Hang a few of them and see how fast it stops.

Tue, 01/10/2012 - 07:20 | 2049595 jekyll island
jekyll island's picture

Organized crime is not even mentioned in this article.  Medicare fraud is the fasting growing segment in their "industry".  Mafioso can scam $30k at a time with fradulent patient lists, CMS doesn't even realize it until 18 months later.  Do this hundreds of times and the government doesn't have the ability to recognize the crime.    

Mon, 01/09/2012 - 23:43 | 2048919 whaletail
whaletail's picture

I don't disagree with this sentiment any longer. The consequence of "letting it slide" is becoming more grave.

Mon, 01/09/2012 - 23:25 | 2048835 Misean
Misean's picture

The politiwhores have voters to frighten. The lobbyists have bribe money and snouts to get to the trough. And the bureaurats have ever expanding budget empires to build. None of them want the system to change, so it won't.

Mon, 01/09/2012 - 23:24 | 2048831 mkkby
mkkby's picture

The self reliant nation has become the whining simpering nation.  Society has a duty to care for it's TRULY DISABLED (verified).  But forcing everyone to pay for the malingering masses is theft. 

The crash can't come fast enough for me.  Unfortunately it's a long way off.  All of Europe, Japan and S America must bat first.

Mon, 01/09/2012 - 23:12 | 2048763 ebworthen
ebworthen's picture

Medicare fraud is awful and should be punished.

It is one symptom of the cancer of American sick-care (wealth-care, corporate-care) system.

Corporations and Lawyers control the system, so taking advantage of the taxpayer is par for the course.

Mon, 01/09/2012 - 23:06 | 2048742 TheSilverJournal
TheSilverJournal's picture

Why is the government in the charity business anyway? Charity is no place for the government. Government gets its fund from the people, so if the people want to give charity, then THEY should give charity. It's real easy for a politician to give charity when it's not their money.

TheSilverJournal.com

Tue, 01/10/2012 - 03:55 | 2049446 StychoKiller
StychoKiller's picture

"I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents." - James Madison

"Charity is no part of the legislative duty of the government." - James Madison

"If Congress can employ money indefinitely to the general welfare, and are the sole and supreme judges of the general welfare, they may take the care of religion into their own hands; they may appoint teachers in every State, county and parish and pay them out of their public treasury; they may take into their own hands the education of children, establishing in like manner schools throughout the Union; they may assume the provision of the poor; they may undertake the regulation of all roads other than post-roads; in short, every thing, from the highest object of state legislation down to the most minute object of police, would be thrown under the power of Congress... Were the power of Congress to be established in the latitude contended for, it would subvert the very foundations, and transmute the very nature of the limited Government established by the people of America." - James Madison

Mon, 01/09/2012 - 23:56 | 2048971 AldousHuxley
AldousHuxley's picture

because doctors wants to make sure they have job security.

 

 

Mon, 01/09/2012 - 22:51 | 2048667 GoldSilverDoc
GoldSilverDoc's picture

Nothing will ever change, until there is once again a connection between whose money it is, and who gets the treatment.  As in - "I want treatment 'X', and I have the money to pay for it".

And that will never happen, until the vast majority of zombie-drone morons in the US come to the conclusion that if they don't have the money for their second liver transplant, it isn't anybody else's duty to supply it.

And that will never happen, until the entire system comes crashing down.

Which, I guarantee you as a physician, it will.

Tue, 01/10/2012 - 02:47 | 2049372 DeltaDawn
DeltaDawn's picture

When it does, are you prepared to barter with patients? Or will you go Galt?

Mon, 01/09/2012 - 22:30 | 2048518 Coldfire
Coldfire's picture

Medicare is funded with blood money. No one should be surprised that fraud begets fraud. The solution is not reform, but a dismantling of this generational scam. The bankruptcy of the United States government will help.

Tue, 01/10/2012 - 04:04 | 2049452 lasvegaspersona
lasvegaspersona's picture

Blood money or not I hope that readers realize that the fraud claimed in this article only happens with hospitals. We physicians are not paid more for 'harder' diagnoses.
The fraud we physicains are accused of is often something far more subtle, 'upgrading'. That would be claiming we did more than what we said we did. There is a fundemantal problem in the way Medicare has established the level of service however and quickly stated I would say Medicare cheats. This is not the place for this discussion or a complicated explanation but please realiaze there is fraud and there is manipulation of providers by extortion. This article discusses the kind of fraud most honest people would agree is truely bad. The fraud physicians are often accused of can be entirely different and when you look into the details of that type of fraud most honest people would say "that doesn't sound like fraud to me".

Tue, 01/10/2012 - 06:00 | 2049522 Popo
Popo's picture

"The system is facing $36 trillion in unfunded obligations"

 

Holy fuck.

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