Wrong Again: White Coat Fraud and Government Regulation Take It Out to the Parking Lot

Hearing Health & Technology Matters
November 6, 2012

 Hearing Economics is juggling several series right now, including one on regulation of professional practices and another on professional theft and fraud.  They’re running in parallel as a reminder that theft is not only immoral and unethical, it’s powerfully destructive.  Innovative, over-the-top frauds can influence Government policy and spending at least as much as powerful special interest groups.  

Big cons are especially egregious when Government is the mark. Governments resent anybody getting the idea that they are vulnerable, much less slow in either sense of the word.   White collar crime used to be where big government cons worked best, but recent successes may have ruined the sting for bankers, lawyers, and Wall Street CEOs by simultaneously raising the perps’ profiles and lowering their credibility in the public’s eye, according to research{{1}}[[1]]I did not go do that research, but I’m sure it’s out there because there really is a journal for everything, including the Journal of Money Laundering Control.[[1]]  

White Coat Fraud

Not so with Healthcare, where ripe opportunities enable white coat crime{{2}}[[2]]The term “White Collar Crime” has been in use since at least 1993, but it has described scientific misconduct rather than theft, as I’m using it in this post.[[2]] to emulate white collar crime characteristics:{{3}}[[3]]Click this link to download a legal discussion of White Collar Crime.[[3]] 

  • Abuse of Power
    • White coats, licenses and credentials are great cover
    • The image of “caring” for health conjures a picture of the Good Guys
  • Intelligent, Skilled Perpetrators
    • Most healthcare providers have average or above average intelligence
    • Most healthcare providers have college degrees
    • Healthcare providers have special skills
  • Victims
    • From the community at large
    • Ill, old, or vulnerable in other ways. Miami is “ground zero” for Medicare fraud
    • Victimization is often indirect, may not be an individual
  • Profitable: 
    •  The market is huge
    • The market is growing by leaps and bounds, pegged to top 20% of US GDP by 2021
  • Manipulation 
    • The market is easily manipulated because all the knowledge resides with the white coat providers
    • Medicare’s legally mandated “pay and chase” system requires payment in a very short window, which practically guarantees payment of claims regardless of legitimacy
    • Electronic medical records and billing open new possibilities for automating fraud as well as care
  • Concealment
    • The market is not transparent because privacy rules cloak interactions and transactions
    • There is a whole lot of money filtering through a whole lot of sequential transactions, often involving multiple providers and electronic transfers
  • Law Enforcement Involved
    • Interstate commerce likely, bringing in federal law enforcement and prosecutions
    •  FBI website has a entire sections on white collar crime (“Lying, Cheating, Stealing”) and Healthcare Fraud (check out the Wanted Posters on that link!)

Wow, talk about temptation.  The list (except the last item) almost makes you feel stupid if you don’t take advantage of the system. Which is a problem for some smart people who like gaming the system more than they like helping people. The Government has noticed and it’s taking action.  Scarcely a day goes by without a headline describing health network frauds, vast networks of doctors falsely billing Medicare for millions and nation-wide dragnets pulling in hundreds of doctors.  And that’s just the bad guys.

Everybody else is just doing their jobs… as fast as they can… and that’s causing trouble now that electronic charts are the standard. For example, providers may be tempted to clone chart notes and bill fraudulently without really acknowledging the theft by using point-and-click menus for standard evaluations.  Among other things, that can produce over-billing   The Government has made it clear that it intends to “vigorously” hunt down practitioners and hospitals that abuse electronic systems intended to streamline, not defraud, healthcare.  

Audiologists Wear White Coats Too

Audiologists are not immune to temptation.  Electronic records are present, though not standardized, in many Audiology practices.  Most practices bill Medicare electronically.  Cut-and-paste templates exist for patient records and they make sense, so long as they are used responsibly with the best interests of the patients foremost.  Likewise, electronic billing by somebody in the back office offers efficiencies, but also opens the door to repetitive billing for procedures that may not be done on every patient.  This has happened:  Alan Desmond described repetitive over-billing in his 10/2/11 post Fraud and Abuse in Vestibular Testing.  Draconian changes in Medicare reimbursement were instigated as the result of that fraud and those changes have badly hurt honest vestibular specialists, their patients, and manufacturers of vestibular test equipment.  Granted, the over-billing was on a large scale, but that does not exempt small audiology operations from abusing the system on a small scale.  

“Billing fraudulently without really acknowledging the theft” is a phrase worth repeating when it comes to billing Medicare for hearing evaluations.  Although Medicare will cover hearing tests for patients who return for follow-up with reports of changes in hearing, it’s a slippery slope for Audiologists, who must determine the probable cause (e.g., age? infection?) when obtaining a physician referral or billing Medicare.  Medicare knows this and states it twice in the CMS Manual{{3}}[[3]]Update to Audiology Policies. Pub 100-02 Medicare Benefit Policy. Transmittal 84, Change Request 5717.  February 29, 2008.[[3]] in no uncertain terms:  

“Billing Medicare for annual or routine hearing tests with a physician order but without true medical necessity, is inappropriate and fraudulent.”  

Faced with that kind of language, it’s pretty hard to claim ignorance if you’re audited.  And if you think Medicare isn’t monitoring patterns of repeat tests for evidence of “routine” use rather than diagnostic purpose, think again.  

I’ll touch sparingly on a final Audiology example.  The aforementioned CMS Manual makes it clear that hearing testing services can only be billed to Medicare if they are performed by a “qualified” Audiologist… and that 4th Year AuD students by and large are not qualified personnel:

  “…a Doctor of Audiology (AuD) 4th year student with a provisional license from a State does not qualify unless he or she also holds a master’s or doctoral degree in audiology.” 

This opens a huge can of worm– as we all know–because these same students can perform the test and it can be billed to Medicare so long as there is direct supervision by a physician or a qualified non-physician (a qualified Audiologist in this example).  This gets back to the billing fraudulently without really acknowledging the theft if “direct” is interpreted loosely.  Does the supervisor need to be in the same room? Same office?  Same city?  Same country? What about “direct” phone supervision?{{4}}[[4]]Ethicists please note that this discussion is about billing, Medicare, and legalities; it is not about the bigger ethical question of the role of extern and mentor within a practice.  We will get to that eventually.[[4]] It might also boil down to “he said-she said” or someone’s faulty memory in the event of a Medicare audit.  

Medicare audits, which are affectionately and appropriately called “RAC” audits, happen, and they happen to audiologists as well as those big doctor conspiracies.  Ours just aren’t big enough to make the news, but they are very painful from what I hear.  At a minimum, you lose money and time.  At a maximum…. you can imagine.

The Economic View is simple. Fraud is costly for all involved, so avoid the temptation on any level.  The perps lose time, money and maybe their freedom.  Their employees may lose their jobs and maybe their reputations.  Patients experience a loss of Utility:  They may or may not lose money or experience sub-standard care, but they lose faith in healthcare professionals regardless of outcome. Marginal costs go up for all other providers.  Everybody’s tax dollars get used to pay for investigations, federal cases, new policies, and so on.  

photo courtesy of Huffington Post

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