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Guest Article

Consultant Practices May Encourage Insurance Fraud, GAO Report Found


Summary: A U.S. General Accounting Office report found that consultants have been advising health care providers to perform billing practices that are not in line with federal guidance and have resulted in higher costs for the health insurance industry.

Certain billing consultants may be encouraging providers to submit fraudulent claims information to private health insurance carriers, Medicare and Medicaid, according to a June 2001 report by the U.S. General Accounting Office (GAO).

The report was the result of an investigation request from Sen. Charles Grassley, R-Iowa, the ranking minority member of the Senate Finance Committee, which held a June 27 hearing on the report's findings. Grassley was concerned that some consultants were providing advice that could result in improper or excessive claims to Medicare, Medicaid, other federally funded health plans and private health insurance carriers.

The report noted that Medicare, Medicaid and private health insurers are vulnerable to health care fraud, which according to the Coalition Against Insurance Fraud, cost the health care industry about $54 billion in 1997 -- with $20 billion attributable to private insurers and $34 billion to Medicare and Medicaid.

Furthermore, HHS' Office of the Inspector General (OIG) has reported that provider-billing errors are significant contributors to improperly paid health insurance claims. The OIG defined billing errors as: (1) providing insufficient or no documentation; (2) reporting incorrect codes for medical services and procedures performed; and (3) billing for services that are not medically necessary or not covered -- which may result in violations of federal law.

Between July 2000 and June 2001, the GAO investigated one seminar sponsored by a physician assistants group -- which raised no concerns -- and two workshops which did raise concerns. Those workshops were ran by the same (unnamed) consulting company and advertised how to enhance revenue and avoid audits.

Specifically, the GAO found that the workshops provided certain advice that was inconsistent with HHS OIG guidance and could result in violations of both civil and criminal statutes. For example:

  1. Certain consultants advocated not reporting or refunding overpayments received from insurance carriers after they were discovered. One consultant claimed that doing so would raise a red flag that could result in an audit or investigation. When asked the proper course of action to take when an overpayment is identified, the consultant responded that providers are required to report and refund overpayments. However, he said that instead of refunding overpayments, physician practices generally fix problems in their billing systems that cause overpayments while "keeping their mouths shut" and "getting on with life." The GAO report indicated that such conduct could result in violations of criminal statutes.

  2. The consultants also encouraged the performance of medically unnecessary tests and procedures as a way of documenting -- and supporting -- billing for more complex evaluation and management services than were actually needed during patients' office visits. A consultant at one workshop stated that one way of justifying bills at high code levels is to have nonphysician health professionals perform numerous procedures and tests. In one hypothetical example, the consultant discussed the case of a cardiologist who examines a patient in an emergency room where tests are performed. The patient is discharged after the cardiologist determines that the patient has little or no problems. To generate additional revenue, the consultant suggested that the cardiologist tell the patient to come to his office for a complete work-up, despite knowing that the patient does not have a problem. The consultant advised that the work-up be performed during two separate office visits -- the first in which a nurse perform tests, draws blood and takes a medical history; and the second in which the cardiologist consults with the patient to discuss the test results and lifestyle issues. This could be billed at a higher level as if a relatively complex medical problem was encountered during the office visit, according to that consultant.

  3. One consultant suggested that providers discourage patients with low-paying insurance plans, such as Medicaid, from using their services by limiting services and scheduling appointments at inconvenient times of the day.

In conclusion, the report indicated that generally the advice at workshops and seminars could ease integrity problems in the Medicare and Medicaid programs by providing guidance on billing codes for evaluation and management services. However, integrity problems would be worsened -- and federal law violated -- if the advice provided at the two investigated workshops was followed. Furthermore, the report noted that the workshop advice raises the concern that some improperly paid health insurance claims are based on conscious decisions to submit inflated claims in an attempt to increase revenue.

Hearing Summarizes Findings

During the Senate Finance Committee hearing, Robert Hast, the managing director of GAO's office of special investigation, discussed the report's findings and how GAO has talked with OIG officials about the need to monitor similar workshops and seminars.

Furthermore, HHS has issued a special advisory bulletin on consultant practices to help providers avoid using consultants that could expose them to legal liability, added Lewis Morris, HHS assistant inspector general for legal affairs. In his written testimony, Morris emphasized that most billing consultants are honest and serve legitimate business purposes. But he noted that a "small minority" engages in improper and illegal practices and encourages the abuse of the Medicare and Medicaid programs. Here are two of his examples:

  1. In one case, two consultants improperly advised more than 100 hospitals to unbundle clinical laboratory tests into their component parts and bill higher rates for the individual components.

  2. In another case, a consultant was routinely billing Medicare and Medicaid for higher levels of emergency room treatment than were provided or supported by medical record documentation.

Dr. Kathryn Locatell, a private physician who assisted the GAO in its investigation, first shared in her written testimony her personal experiences with consultants. She noted that as a faculty member at a California medical center, she attended a mandatory billing and coding seminar. In her view, the goal of the consultants who ran the seminar was how to provide proper documentation to justify higher billing codes, regardless of medical necessity, to bring in more revenue for the medical center. Locatell found that this same theme "permeated" the seminars and workshops analyzed during the GAO investigation.

"The information we gathered in the course of our investigation suggests that the consultants marketing to and attracting physicians and physician groups advocate enhancing revenues in an 'audit-proof' fashion through systemic documentation efforts, regardless of medical necessity," said Locatell.

The report can be found on the GAO web site at http://www.gao.gov/cgi-bin/getrpt?gao-01-818. Or it can be ordered by calling 202/512-6000 and asking for report #GAO-01-818.

Excerpted from the August 2001 supplement to Employer's Guide to Self-Insuring Health Benefits, ©Thompson Publishing Group, Inc., 2001. All rights reserved.

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