Saturday, April 7, 2007

Here are some shocking details about the Medicaid fraud we've been hearing about.

>In response to questions about D and T Centers and associated facilities, the answer always was that the clinics had an "all inclusive rate." No one was able to explain what that meant, although they took great pride in saying it. There was never a definition of what was or was not included, nor did the application request such information.

One frequent method of overbilling or fraud, is "unbundling" where a provider separates the various services so that the total of the reimbursement items, exceeded the all-inclusive rate. These subcontractors were usually owned by the same corporation, or subsidiaries of the parent or by individuals with a financial interest in the clinics.

One example is dialysis centers, where the equipment and reagent manufacturers have bought almost all the dialysis centers from the physician or hospital owners and hired the same people back to operate the clinic. Then the manufacturers started buying the clinical laboratories that monitor both the patient but also the water and chemicals used in the instruments. Patients now have little or no choice in provider as most are owned by the same one or two corporations. Despite numerous prohibitions against such arrangements as, as well as mulitiple fraud prosecutions throughout the country and NY law that prohibited such arrangements, DOH acceded to the requests of the high powered lobbyist and created opinions that made these arrangements legal.

Other troubling arrangements include large, out of state, and for-profit group practices buying physician practices and clinics in New York. The so-called professional corporations that were set up to run these services were often headed by physicians neither located nor practicing in NYS, making them unreachable in the event of a malpractice or regulatory violations. Despite NYS restrictions on the corporate practice of medicine, DOH also ignored these groups and they are operating in oncology, reproductive medicine and other specialties.

Many believed that these close relationships were prohibited by the law. At minimum, the arrangements required special oversight to assure the proper arms length business practices. I had the occasion to review some of the records of the reimbursement requests from many of these facilities. What I discovered is that "all-inclusive" meant whatever the clinic owner said it did. There was nothing in the file to specify what services were included and which were not. Because the clinics all mentioned "clinical laboratory" as being included, when excesses were found in billing by laboratories on work referred by clinics, the clinics were all able to say "those tests weren't the ones we included," escaping both prosecution and recovery of excess amounts. Pharmacy services were also whatever the clinic said were included.

The worst case I found was a for-profit abortion clinic in NYC. I do not know if the facility still exists or is under the same ownership. The cost report submitted, on which the rate was based, included $600,000 in salary for the owner, a physician who did not practice OB-GYN. The request included rent for the space, to the owner, the same physician. I think it also included administrative and secretarial salaries, and possibly nursing and medication. It DID NOT include the salaries of the physicians providing the services or the clinical laboratory testing which is a major component of this service. When I questioned this, the staff told me that they approved the requested rate as it was below the peer average in the area. In fact, they suggested that had the facility asked for more, it would have gotten it.

When I asked with which facilities the comparison was with, they listed some of the major non-profit family planning operations that really HAD rates that included all the necessary services.

The rest of the story is that the physician services were provided by a GYN- specialist PC, owned by the same physician, who was not a GYN and the laboratory services were offered by the laboratory owned, again, by the same physician.

The rate setting system for ambulatory services needs to be extensively revised.