Health Care Fraud: Whose Trust Needs To Be Restored?

April 1, 1999

Without clear guidance from government regulators, mistakes are easy to make and, rather than raising concerns in a businesslike fashion, the first notification of a problem often comes when the enforcement action shows up at the door.

It's a good thing for psychiatrist George O. Krizek, M.D., and his wife, Blanka, that their daughter decided to become a lawyer, because otherwise they would be bankrupt by now. In 1992, the U.S. attorney's office charged the couple with fraudulently billing Medicare and Medicaid, claiming the government was owed a staggering $245,392 in overpayments and over $80 million in penalties. Without the help of their daughter, Monika Krizek Griffis, they would most likely have never survived the labyrinthine legal process that has already yielded three lower court rulings and a U.S. Court of Appeals decision [USA v Krizek, 111 F.3rd 934 (1997)].

With no end in sight-the case is before the U.S. Court of Appeals for a second time-Griffis said her parents' case raises important issues about government-sponsored health care programs, and about the pitfalls still faced by physicians who must comply with complex, ambiguous and ever-changing rules.

"The system is a horrible mess," Griffis said during an interview with Psychiatric Times. Without clear guidance from government regulators, mistakes are easy to make and, rather than raising concerns in a businesslike fashion, the first notification of a problem often comes when the enforcement action shows up at the door. Griffis noted, "No one ever contacted my father to ask him why he was billing the way he was. They just came in with cannons blazing and never gave him a chance to explain or repay the overcharges. The government just presumed the worst."

Last July a federal district court judge in Washington, D.C., agreed, issuing a ruling in the Krizek case that pared the more than 8,000 violations originally alleged by the government down to just three. Providing a rare insight into the impact of these cases, the judge observed that Krizek, "although apparently a fine physician" is now "a broken and sick man." Then, the judge condemned what he saw as an abuse and misuse of the federal False Claims Act.

"The Government's pursuit of Dr. Krizek is reminiscent of Inspector Javert's quest to capture Jean Valjean in Victor Hugo's Les Misérables. While the Government's vigor in pursuing violators of the law is to be commended, there comes a point when a civilized society must say enough is enough" [USA v Krizek, 7 F.Supp.2d 56 (1998)].

Karen N. Walker, a corporate litigator and partner in the Washington, D.C., office of Kirkland & Ellis, has taken over Krizek's defense. The firm has agreed to represent the now-retired 67-year-old psychiatrist and his wife without charge. Walker told Psychiatric Times that, while Krizek's case is unusual, it nevertheless should motivate physicians to avoid entanglements with the government over billing.

"I think it is more an anomaly, but somewhat of a scary one," Walker said. Although the government usually pursues legitimate cases, there are times when "either an investigator or an attorney...gets stuck on a certain case and wants to go to the ends of the earth." When that happens, Walker added, "they have all the power...[and] resources to do it."

But Beth Giebelhaus, director of program integrity operations for the Health Care Financing Administration (HCFA), the agency that manages Medicare and Medicaid, disagrees with the notion that there is overly aggressive enforcement. "I wouldn't characterize our work as anything other than insuring that the integrity of our payment system is good," she said. While conceding that there are often communication difficulties and disagreements between HCFA and physicians, Giebelhaus discounted criticism of their auditing efforts. "The instances where HCFA refers cases to the Inspector General are frequent, but they're not overwhelming and they're certainly not based on innocent error. We do a very thorough case development to assure that we are not casually referring something."

The health care community shouldn't expect any apologies for overly aggressive enforcement such as those made by the U.S. Internal Revenue Service (IRS) last year. "We have so much due process built into our system because we are a public agency that operates in the sunshine primarily, and we go out of our way to make sure that everyone has a fair opportunity," Giebelhaus said. "The basic fact is that no one particularly likes to be regulated at almost any level and any time you look at [a] particular group of providers or kinds of physician practices, you are going to get some push back from them because they don't want that."

For psychiatrists, as well as other physicians, trouble usually comes from four categories of violations: improper upcoding, lack of medical necessity, incorrect utilization of the evaluation and management codes, and illegal kickback or referral fees. If found to be in "knowing" violation, physicians face huge penalties under several federal statutes and, in some cases, criminal prosecution. Fighting the government can drive even the most well-heeled practitioner into the poorhouse.

In March of last year, HCFA announced that it would be beefing up its auditing force with private contractors. According to Nancy-Ann Min DeParle, HCFA's administrator, the outside firms will conduct medical reviews to ensure medical necessity, prepare cost report audits to check for overbilling and provide other monitoring activities. The success of Operation Restore Trust, a special program geared toward curbing health care fraud and abuse, and other HCFA monitoring programs, has resulted in savings of $23 for every dollar spent on enforcement, according to Donna Shalala, secretary of the department of U.S. Health and Human Services (HHS).

Giebelhaus insists that the agency doesn't "penalize innocent mistakes in any segment of the medical community," although, "we will seek to recover payment if we've paid wrong." She added, "We know there is a lot of error out there...and that's what we're seeking to correct."

HCFA released 1998 figures that estimate a 7.1% erroneous Medicare payment rate, which represents $12.6 billion. This is compared to 1997's 11% rate, which represented $20.3 billion. "We still have a big job to do in eliminating improper Medicare payments, but with a 45% reduction in improper payments in just two years, we are making real progess," said Shalala.

These financial incentives have caused the government to push enforcement to the limits, according to David Vaughn, an attorney in Baton Rouge, La., who specializes in the defense of health care fraud and abuse cases, and who has represented numerous psychiatrists. He predicts the number of audits will increase substantially over the next five years as HCFA hires the private contractors, a situation that may not bode well for psychiatrists.

"The current state of affairs is that psychiatrists are the No. 1 group of targeted professionals in the country," Vaughn told Psychiatric Times, attributing the government's focus on mental health to its successful prosecution of National Medical Enterprises in 1994. The company, now known as Tenet Healthcare Corp., paid over $300 million in criminal and civil fines and penalties arising from the operations of its psychiatric hospitals.

Vaughn concedes that the government has a valid reason to pursue fraud aggressively-HHS's Operation Restore Trust has resulted in numerous criminal convictions and hundreds of millions in recovered overpayments, fines and penalties. Nevertheless, like the criticism directed at IRS practices, health care fraud and abuse enforcement has gone too far in some cases.

"We're at the level of what I call medical McCarthyism," Vaughn said. "It used to be during the McCarthy era that everyone was a Communist. Now everybody is a fraudulent biller. What [physicians] have to understand is that the government didn't dump $1 billion into enforcement over the course of five years to come up empty."

Vaughn says that physicians must spend the money and effort to assure their office billing practices are beyond reproach, and that they must participate meaningfully in managing their front offices. Blaming the billing clerks won't necessarily provide a defense. In addition, it is important to develop and maintain a formalized compliance procedure that includes ongoing, periodic audits and the return of overpayments to the government before they are found by investigators. Doing so, Vaughn says, will go a long way toward convincing prosecutors that any impropriety was a mistake rather than a "knowing" violation, a determination that could mean the difference between refunding excess payments and paying huge fines or even serving a prison term.

William Mahon, the executive director of the Washington, D.C.-based National Health Care Anti-Fraud Association, whose members include both private health insurers and public agencies responsible for enforcement, disagrees that enforcement has gone too far. Even the conservative estimate that insurance fraud and overcharging eats up 3% of the health care dollar (some estimates are as high as 10%) means that the health care system is ripped off for $33 billion a year.

"My impression is that when you look at the entire picture, the government has limited resources to spend on [enforcement]," Mahon told Psychiatric Times. Although regulators have more money than they used to, "the pot is not limitless and it takes an awful lot to bring something to the level of an enforcement action." Agreeing that there may be times when someone is treated unfairly, for the most part he views the system as reliable.

"People argue mistakes...all the time and, in many cases, if not most cases, that's what it turns out to be and it never becomes an enforcement action," Mahon said. "[The government doesn't] indict people lightly and doesn't file civil suits or impose monetary penalties lightly. Things go through any number of layers before they ever get to that point where such an action is considered."

Meanwhile, Eugene Cassel, J.D., the APA's deputy director of regulatory affairs, says efforts are underway to clarify evaluation and management codes, and to manage the privacy issues that plague Medicare audits. He said the American Medical Association is also deeply involved in working with federal regulators in an attempt to make sense of what is an overly complex and increasingly unworkable system.

According to Bruce Blehart, J.D., senior counsel for the AMA, the organization recognizes that with recent appropriations to boost enforcement measures, physicians and other health care providers are just beginning to feel the pressures of more intensive oversight. In response, the AMA is working with federal regulators to ensure more rational enforcement and with the medical community to improve education efforts.

He agrees that going through the administrative and legal system to prove a point could cost more than the alleged overpayment, a factor that causes some to just pay what is demanded. If a finding is made against the physician, not only is there a monetary penalty, but the practitioner may end up excluded from all government health care programs. As a result, Blehart said, they are seeing more and more physicians "undercoding" as a safety valve against potential mistakes.

"There's an overall sentinel effect that has been created...this is a cloud that is hanging over every patient/professional encounter," Blehart said. "[Doctors] are realizing that they are changing how they respond to the patient encounters based on concerns over enforcement. The question has to be asked whether this is going to be in the best interest of the patients."

Congress is also looking into overly aggressive regulatory actions. Last May, the Krizeks testified before the House Subcommittee on Commercial and Administrative Law, pleading for clarification of "Byzantine HCFA billing codes" and urging enforcement to be directed toward "clear cases of fraud," rather than relying on "complicated theories and assumptions about how billing codes should have been, but are not, used by the medical community as a whole." Diagnosed with cancer in January 1996, Krizek has yet to convince the government to relinquish its pursuit of him.