Navigant Study Missed the Point on Fraud

Tuesday, July 8, 2008 | 0

By Linda Atherley

I am writing this not as a researcher, but as a practitioner in the workers compensation system for almost 20 years. I am also not saying that the study of medical billing fraud by Navigant Consulting for the Fraud Assessment Commission should not have been done. Rather, I feel that the study is missing a few very important areas and that the recommendations are not pointed to getting at the very real issue of fraud, in the billing area and others, which provides a very real harm to the system.

I would also like to point out that this study of medical billing in no way addresses the very significant problems with pharmaceutical prescriptions. Nor does the Navigant Study address, integrate, or utilize data available on the subject from other sources, even though one of the purposes for the study was to identify other areas for investigation or follow-up. 
 
For instance, on the FBI website :
 
"Over the years, FBI national initiatives have addressed frauds involving medical transportation, durable medical equipment, hospital cost reporting, outpatient surgery centers, pharmaceuticals, and a variety of other specialized investigations.

 "...Throughout the country, various field offices have conducted their own initiative targeting clinic, pharmacy, medical equipment, home health agency, cosmetic surgery center, and other frauds which are or great concern within a community.....

"In order to meet the needs of the private insurance industry, the FBI works very closely with the National Health Care Anti-Fraud Association to identify crime trends and provide training to industry an law enforcement agency personnel. Also the insurance companies utilize an internal Special Investigations Unit, whom work closely with FBI and our law-enforcement partners.  FBI investigations in several cases focused on subjects such as conducting unnecessary surgeries, prescribing dangerous drugs without necessity, and engaging in abusive or sub-standard care practices. Recent trends also suggest advances in technology an electronic medical data have caused health care fraud schemes evolve. Of course, fraud schemes continue to consist of traditional schemes that involve fraudulent billing such as billing for services not rendered and upcoding of charges for services provided." 
 
"Cases initiated within the scope of the Internet Pharmacy Fraud initiative focus on Internet websites through which individuals sell illegal prescription drugs and controlled substances. The overall scope of the internet pharmacy fraud initiative is to identify fraudulent Internet pharmacies and targeting physicians who are willing to write prescriptions for financial gain outside of the doctor/patient relationship with no legitimate medical purpose. Also in the scope of this initiative are investigations involving the sale of counterfeit and diverted pharmaceuticals on the Internet."
 
In fact under the heading "Significant Cases"--Affpower (San Diego) a 313-count indictment charged 18 individuals with operating an online pharmaceutical distribution network known as Affpower throughout the U.S. and abroad.  Defendants included three physicians, two pharmacists and one pharmaceutical operator....

"From August 2004 through June 2006, Affpower received more than 1 million Internet orders for controlled and controlled prescriptions pharmaceuticals from customers in all 50 states and generated in excess of $126 million in gross revenue. The investigation was handled jointly with ICE, FDA, IRS, USPIS and state and local agencies."

Similarly, the California Department of Insurance Advisory Task Force on Insurance Fraud, on page 2 of its report, states that, "Insurance Fraud in California totals over $15 billion each year, costing each resident an average of more than $500.00 per year." The report also states, "In California, the losses from insurance Fraud even exceed the losses from tax evasion."

Further on page 3, the Advisory Task Force found:  "...fraud perpetrators have.....performed inappropriate medical treatments n defenseless victims.  Vulnerable groups such as seniors, immigrants or small businesses may be special targets of sophisticated swindlers."

"For example, a medical provider could bill a workers' compensation insurer, a health insurer, and an automobile insurer for the same unnecessary or even fictitious medical services. A stronger and more coordinated effort within and among regulatory and enforcement agencies is needed to address the various types of insurance fraud."
 
Based on the existing studies and work being done in law enforcement, I don't believe that the Navigant Study correctly or reliably either identifies areas of fraud which were not already apparent, nor does it identify any new areas.  Further, the consultant's recommendations, discussed later, are not well taken.

So, to begin:
 
First, the Navigant study evaluated cases from 2001 through 2006. Starting in 2004, insurers and employers had medical cost- containment tools that they did not have in 2001 through the end of 2003. These include, but are not limited to: The required use of medical utilization review; medical billing review, a change in the definition of "reasonable and necessary" in Labor Code Section 4600, the required use of the American College of Occupational and Environmental Medicine guidelines and other "evidence based medical guidelines" for treatment, and -- last but not least -- the use of medical provider networks (MPNs) with the ability to hand-pick providers for treatment.

Therefore, the billings from 2004 through 2006 clearly had a more stringent review through the process and any findings of "overbilling" from 2001-2003 should be strictly scrutinized to make sure that they are not correctable or actually corrected with use of the tools from the 2003/2004 reforms. 
 
With respect to Mr. Zachry's comment printed in a WorkCompCentral Central article below:
 
"Zachry said he’d like to see doctors preparing bills in accordance with a fee schedule and see insurers paying in accordance with the fee schedule. That would go a long way to stopping the abuse found in the study," he said.
 
The Navigant study put bills where services were billed at fee schedule into the "overpayment" category because they potentially could have been reduced further below fee schedule with cuts per a preferred provider organizaiton contract to which the provider was conveniently a part to for other than workers' compensation services.  If they are using this category to support their conclusions about overpayment then how accurate really is the study since it appears that they were reaching for problems?

Also, the number of records where the applicants said they did not receive services was six. That is six out of 97, which Frank Neuhauser at the CHSWC meeting June 26 estimated to be about 6%, which then Frank Neuhauser stated would be between 1% and 11% of bills assuming an error rate of 5%, which is standard, I guess.

So, again, what real validity does this study have? By the way, it was not 761 bills, it was 761 applicants.  In Table 3, page x of the study, it references some 2,079 of 38,487 "bill lines" having errors that were overpayments, totaling $173,801.00 and 1,371 "bill lines" with underpayment errors totaling $51,993.00 with a net of $121,808, which was 4.5% of the 2.74 million dollar total sample.

So, under the 761 different applicant criteria, we have six out of 761 applicants returning the survey saying that the services were not provided. This would be  0.007884362680683, or less than 1%, i.e., 0.7% of the applicants saying that services billed were not rendered. What that means as to the billing, I am not calculating.

The dollar value reported in Table 2: page 6 of the study is $1,537.00, which is hardly a significant figure--for instance, if six spine surgeries at a total cost of $40,000 each were billed but not provided, then the amount for these six applicants would be six times 40,000, or 240,000.00. A $1,537, the best you can say is that is an average of $256.16 per applicant in the 97 cases actually in Table 2.
 
Also, under the study, Navigant did its own independent review of the services provided to come up with the "not medically necessary: determination -- and based that determination on whether or not the services complied with the American College of Occupational and Environmental Medicine (ACOEM) guidelines.  Well, the ACOEM guidelines do not cover every potential modality of treatment. For instance, liver transplants are not covered under ACOEM guidelines, and a lot of chronic pain treatment is not covered either. Further, the State of California rejected ACOEM for chronic pain and is going to the Official Disability Guidelines, adopted other guidelines for chiropractic, acupuncture and are developing their own schedule for post surgical physical therapy.

I will also point out that treatment outside ACOEM guidelines (which are guidelines, not limits for treatment) may be approved by utilization reviewers and/or the adjusters where warranted. Further, Labor Code §4600 also allows for treatment under other "evidence based guidelines".  Some treatment is allowed pursuant to an AME evaluation or panel QME evaluation or an award by a workers' compensation judge, so an analysis of "not medically necessary" based solely on Navigant's own utilization review, is probably not appropriate either unless each bill so reviewed, the evaluating doctor's name(s) and the entire basis for rejection under their review was available and rebuttal was allowed by the physician whose bill was being reviewed and/or the adjuster who paid the bill and or the review included any associated AME/Panel QME evaluations or WCJ orders. 
 
 
Navigant Recommendations, contained on page xiii of the study, follow:
 
1.  That doctors "register" with the State of California in order to treat workers' compensation patients:  My comment: The doctors are already subject to a slew of regulations from reporting to testing to billing, fee schedules, utilization review, medical treatment guidelines, (Treatment, ACOEM, AMA, DWC) etc. Further the DWC is already working at full capacity on panel QME requests, regulations, treatment guidelines, and testing and certification of QME's among other things.  The employers have ever more refined MPNs and more MPNs than ever. We are losing more and more QMEs and quality treating doctors in this system. I don't think that the additional "registering" to be able to treat.is necessary or appropriate.
 
2.  "Expanding statutory authority for access by the Department of Insurance to injured workers' medical records."  My comment:  This raises a whole host of medical privacy issues as many medical records have nothing to do with the treatment in question or the particular medical bill in question. The insurance companies and employers cannot get medical records without lawful subpoenas or a medical release, and they are strictly required to conform with the requirements of the Health Insurance Privacy and Accountability Act and other medical privacy laws. This whole recommendation creates more problems than it could every solve.
 
3. "Increase education efforts for providers, insurers and other relevant parties about appropriates courses for ACOEM Guidelines for the most frequent types of injuries...." My comment: We already have a plethora of courses for QMEs, treating physicians and others on the ACOEM and other guidelines. The ACOEM guidelines are shoved down the providers' throats every time utilization review is performed (which is often). The amount of money spent in educating doctors about the ACOEM guidelines and AMA Guidelines and every other requirement to practice medicine in the current workers' compensation environment probably is equal to the benefit dollars actually paid out for medical benefits to the injured workers. If they don't get it by now, they never will. Medical treatment, ultimately is provided on a case by case and person by person basis. Physicians have ethical and professional responsibilities to patients. Guidelines are guidelines. There will always be treatment outside the guidelines, and medical education and breakthrough continues within and outside the workers' compensation system. I don't think that this is a beneficial proposal.
 
4. "Data Mining throughout the workers' compensation system...to detect aberrant trends and practices..." My comment: Probably a good idea as long as it is recognized that not all aberrant trends mean fraud or even abuse.
 
5. Develop "best practices" My comment: If the employers and insurers have not done it now, the Navigant study is not going to get it done.
 
6. EOB (Explanation of Benefits) letters to Injured workers: My comment: How accurate is this reporting going to be, and if it is not accurate, then any potential benefit would be outweighed by time and effort and money put into sending the EOB letters and processing them. There are other techniques, i.e., picking up the phone and talking to the unrepresented applicant, picking up the phone and asking the applicant attorney if there is a real question, a pointed letter, deposition of the applicant, etc. that may be more effective overall.
 
Contrast these recommendations with the following recommendations of the Fraud Advisory Task Force.
 
No. 7:   Insurer SIU's must be trained to provide better quality referrals and the Fraud Division should provide more feedback.
 
Page 13,  No. 12:  Strengthen the immunity provisions for companies that report suspected fraud and cooperate in investigations in accordance with National Association of Insurance Commissioners NIC Insurance Fraud Prevention Model Act.
 
Page 15:  Workers' Compensation--
 
1)    Require employers to publicly disclose their workers' compensation coverage, to improve compliance with Labor Code §3700, which requires this insurance; Require the Commissioner to publish the workers' compensation coverage of every employer (as do 29 other states) to improve compliance with Labor Code §3700 which requires this insurance; increase civil and criminal penalties for premium fraud, including misclassification of payroll as well as under-reporting of payroll; increase civil and criminal penalties for willful failure to carry insurance. Existing law allows under-reporting to be punished as a felony, while going completely uninsured is only a misdemeanor. The law should allow will lack of insurance to be charged either as a misdemeanor or as a felony.
 
2) Review the cost benefit of requiring carriers, third-party administrators and self-insured entities to send a statement of benefits document  to patients to verify that services were actually rendered, the extent of those services and to include information on where and how to report suspected fraud, see Navigant Recommendation No. 6.
 
3)   Conduct additional research on 1) misuse of 'independent contractor' designation, 2) coverage fraud in temporary help and professional employment agencies, 3) medical billing practices and 4) methods to require greater disclosure of employer coverage information. 
 
Conclusion:

Lastly, while I agree that medical billing review is absolutely necessary, and only services medically necessary should be authorized, I would hate to have medical services further curtailed because adjusters are afraid to authorize medical services or billing based on this study, or have more treating physicians  flee the system because they can no longer operate in a system with all the reporting requirements, and utilization review and other regulations imposed are them because their medical bills for medically necessary treatment billed at the appropriate fee schedule are cut to where it no longer is practical for them to practice in workers' compensation. This is particularly true since the reasons for the MPNs was to have good treating physicians who will report per regulations and use their maximal efforts to cure or relieve the effects of the injured workers and return them to work in a timely and appropriate manner.
 
The Navigant study has a lot of useful information. However, the study is not, in my view, sufficient to make sweeping changes to the medical billing system or really any wide based recommendations for changes in the system. One hopes that we can simply take the information provided by the study, integrate it with information available from other sources and continue to work to make a clean workers' compensation system where employer costs are minimal and benefits to injured workers are adequate.

Linda Atcherley is immediate past president and legislative director for the California Applicants' Attorneys Association.