Medicare Seeks to Fine and Expel 'Recalcitrant Providers'

January 27, 2014

In yet another move against misspent tax dollars, the Medicare program is seeking to identify, fine, and possibly exclude clinicians who continue to bill for medically unnecessary services and charge excessive amounts even after they've been thoroughly taught to do otherwise.

Fines for such scofflaws could be as high as $10,000 for each service — a single office visit, for example — found to be unnecessary. In addition, they would owe Uncle Sam an assessment worth up to 3 times the dollar amount claimed for each service.

The Centers for Medicare & Medicaid Services (CMS) announced that it is targeting what it calls "recalcitrant providers" in instructions issued last month to Medicare administrative contractors (MACs), which are private companies that process claims. "Over the years, CMS has heard from Medicare contractors that some providers are abusing the…program, and, even after extensive educational efforts, do not change their inappropriate behavior," CMS stated, referring to remedial education supplied by MACs.

Traditionally, MACs have placed such repeat offenders on prepay medical review, which often requires them to submit patient records upfront to support their claims. In its instructions last month, CMS said there may be better ways for MACs to police recalcitrant providers than prepay medical review. An alternative, the agency said, is for MACs to report them to CMS, which would turn over these cases to the Office of Inspector General (OIG) in the US Department of Health & Human Services (HHS). In turn, the OIG could fine the providers, exclude them from Medicare, or both.

The OIG states on its Web site that providers have the right to request an HHS administrative judge when it issues a "demand letter" seeking to penalize a provider or remove him or her from Medicare. If the administrative judge grants the OIG's request, the provider can appeal the decision. However, most of these cases are settled before progressing to an official penalty or program exclusion, although money may still change hands to "resolve a potential liability," according to the OIG.

Medically Unnecessary Services in the Spotlight

The formal CMS definition of recalcitrant provider describes providers who "abuse the program" despite remedial education, but the instructions issued to MAC focus on 2 particular kinds of abuse. CMS referred to one section of federal law that spells out penalties for providers who submit claims for a pattern of services or items "that a person knows or should know are not medically necessary." It cited another part of federal law stating that HHS can exclude providers from Medicare for submitting claims for excessive charges or unnecessary services, or failing to furnish necessary services. Such offenses technically qualify as abuse as opposed to fraud, but still can "expose providers to civil and criminal liability," according to CMS.

A common example of a medically unnecessary service is a diagnostic test a patient doesn't need. Sometimes this form of abuse is not so much about the propriety of a single test, but the volume, said medical coding expert Betsy Nicoletti, in Springfield, Vermont. "You can have a physician who performs an electrocardiogram on a patient every month even though the findings never change," she told Medscape Medical News.

Upcoding an evaluation and management service such as an office visit a level or two could qualify as an excessive charge, said Nicoletti. However, when it comes to Medicare's campaign to reduce fraud and abuse, "that's not where the real money is," she added.

The CMS memo on recalcitrant providers is just one of several recent instances of the government putting physicians on notice about billing shenanigans. The OIG issued a report last month recommending that CMS screen the highest-paid physicians in Medicare for possible improper payments. The OIG found that 2% of clinicians account for 25% of Medicare Part B spending, and that 303 clinicians collected more than $3 million apiece in 2009.

The OIG also recommended earlier this month that CMS scrutinize the audit logs of electronic health record systems used by physicians and hospitals for signs of fraud, such as improper copying and pasting of patient data.

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