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News & Resources

Healthcare Compliance, Auditing Solutions. Technology, Risk-Based Auditing

$60 Billion In Improper Payments Should Prompt a Health Care Crackdown

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October 18, 2017

$60 Billion In Improper Payments Should Prompt a Health Care Crackdown
By Adrian Velasquez  Originally published in The Hill.

Billing mistakes and fraud are costing Medicare and taxpayers  tens of billions of dollars  annually. More than  $16 billion in improper payments  to private Medicare Advantage health plans, coupled with overpayments for standard Medicare programs reached about  $60 billion in 2016.

Medicare currently services around  
56 million people,  which includes those who are 65 and older, as well as disabled people of any age. Out of those eligible for Medicare, approximately  19 million  chose to enroll in Medicare Advantage plans instead of standard Medicare. As the tremendous numbers of baby boomers continue to retire, federal officials predict the  Medicare Advantage option will continue to grow
Law, as opposed to a negotiation process like those used by private insurers, determines Medicare and Medicaid payment rates, while managed care plans are most often negotiated with the hospital. 

Although participation in Medicare and Medicaid programs is on a voluntary basis for hospitals, not-for-profit hospitals are required to care for Medicare and Medicaid beneficiaries in order to receive their federal tax exemption status. Hospitals generally choose to participate, since Medicare and Medicaid generally account for  
more than 60 percent  of all care provided by hospitals.

Payment rates for Medicare and Medicaid are currently set lower than the costs of providing the necessary care. This results in 
underpayment. Medicare payments that are lower than the actual costs affect  64 percent of hospitals,  while 60 percent of hospitals  are underpaid due to Medicaid. Hospitals are generally only receiving payments of  88 cents for every dollar  hospitals are spending for Medicare, while Medicaid is slightly higher at  90 cents for every dollar  spent.

The payment error rate for standard Medicare in 2016 alone was found to be at 11 percent, which translates to 
$41 billion. At a minimum, minor mistakes can be found in  four out of five U.S. medical bills, which costs  $68 billion  annually in unjustified health-care spending for both patients and doctors.

Health care industry standards are constantly evolving, and physician staff and doctors alike lack the much-needed training on new medical coding updates. This leads to improper coding and not classifying a patient’s diagnosis into the required medical numeric codes doctor’s offices have to use to get government insurance reimbursement for the services rendered.

Common billing errors  include, duplicate charges, incorrect patient information, increased quantities, in-network balance billing, and separating bundled procedures. Charges for tests or procedures canceled prior to services, misrepresentation of a patient’s diagnosis to a higher cost one, and increased times for being under anesthesia or in the operation room cover some of the other frequently found  billing mistakes.  Another issue is  price gouging  on medical bills, such as charging $23 for one alcohol swab or $53 for a pair of non-sterile gloves.

There is an obvious need to eliminate the errors, improper payments and fraud. The director of health care reviews for the Government Accountability Office, James Cosgrove, reported to the House Ways and Means oversight subcommittee that,  
“Fundamental changes are necessary”  when it comes to Medicare and Medicaid Services. There needs to be a better way to find billing mistakes as well as recouping overpayment from health insurers.

As the crackdown on health care fraud forges on, Attorney General  Jeff Sessions  announced in July 2017 that there were  
412 people arrested  with approximately 100 doctors among them. Those arrested are charged with a variety of health care fraud schemes, mostly related to Medicare, that swindled the government out of about  $1.3 billion.

As one of the  
most heavily regulated industries,  health-care providers have a multitude of intricate rules and regulations to be mindful of and they are growing exponentially every day. Health-care providers attempting to manage the risks associated with the ever-evolving regulatory landscape have  designated a chief compliance officer (CCO)  to navigate the landscape. However,  43 percent of CCOs surveyed  reported having other responsibilities as well. More than  30 percent of health-care provider respondents  reported that their total annual budget for compliance and related activities to be $1 million or higher.

Many hospital systems are notorious for tracking and dedicating  
hundreds of hours  of staff time to conform to compliance audit directives. These audits are generated by Medicare to recoup revenue and tend to follow patterns of overpayments to hospital providers.

A leader in predictive analytics and compliance tools for hospitals and large health networks,  
Fi-Med,  notes that using technology to locate “behavioral” coding issues can prevent incorrect billing while  saving millions of dollars  for hospital networks. Furthermore, health-care providers who use analytics to improve their internal processes as well as an instrument to identify red flags are dramatically improving their compliance risk and bottom line.

It is optimal to eliminate overpayments as well as underpayments. Targeted analytics are a key component to turning non-protected health information data instantly into a comprehensive report that not only mitigates risk for compliance violations, but also finds lost revenue to hospital systems.

Adrian E. Velasquez is the founder of Fi-Med Management. Their mission is to bring business acumen and compliance expertise to health care providers throughout the United States. Velasquez's has extensive experience as a systems administrator and national health-care consultant.


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