Medicare Reimbursements Data: Invasion of Privacy or Exposure to Fraud?

medicareOn Wednesday, April 9th, 2014, the Centers for Medicare & Medicaid Services (CMS) released data to the public containing “information on services and procedures provided to Medicare beneficiaries by physicians and other healthcare professionals.” The data contains information on the “utilization, payment (allowed amount and Medicare payment), and submitted charges organized by National Provider Identifier (NPI), Healthcare Common Procedure Coding System (HCPCS) code, and place of service.” The release of this Medicare data to the public has been accompanied by mixed reactions from physicians, federal officials, and medical authorities; yet, the advent of such data has been said to be “a milestone in healthcare transparency.” The data, which many physicians claim is an “invasion of privacy,” is not without flaw, and certainly should not be taken without context. As analysts use this data to uncover the works of physicians committing Medicare fraud, it is crucial to remember that the issue exists on a far grander scale: the Medicare system itself.

Since 1979, and up until May 2013, the release of Medicare data had been legally barred, upon the basis that “doctors’ right to privacy trumped the public’s interest in knowing how tax dollars were spent,” as contended by the American Medical Association (AMA.) Dow Jones & Company, a parent company of the Wall Street Journal, challenged the injunction in 2011, after a series of articles published by the Journal were released, that showed how information from the Medicare data could be used to expose fraud and abuse in the $549 billion health care program. The 33-year injunction was lifted in May 2013 when a federal judge overturned the injunction, citing that “case law had narrowed the scope of the Privacy Act over the past three decades” and thus no longer supported the injunction. Laura Handman, an attorney for the Wall Street Journal, mentioned, in court: “Medicare has expanded and now occupies a much larger footprint.” Furthermore, she noted that the health care system has moved to electronic billing within the last 34 years, and thus the “opportunity for fraud is much greater.”

On Thursday, April 17th, a federal grand jury indicted a Chandler hospice agency in a Medicare fraud case. Paula Kluding of Chandler, and Patricia Carter of Tecumseh were both charged with 39 counts of Medicare fraud, along with Prarie View Hospice Inc., owned by Kluding, which was also charged with 39 counts of fraud. The District Attorney for Western Oklahoma, Sanford C. Coats, announced that Kluding and Carter “conspired to conceal patient medical conditions and misrepresented the quality and quantity of in-person visits to terminally ill hospice patients.” The indictment charges these three defendants with conspiracy, obstruction of a federal audit and making false statements in a health care matter. It is reported that both Kluding and Carter could face up to five years in prison and a fine of $250,000 for each count ($9.75 million.) Putting this into perspective, how much more so should physicians, who intentionally inflate Medicare reimbursements for their own profit, and have received much more in reimbursements, be punished for their wrongdoing?

Medicare data from 2012 reveals $77 billion in reimbursements were given to more than 880,000 health-care providers. More than a dozen physicians received at least $10 million in reimbursements. Of all registered physicians, ophthalmologists top the list of the biggest recipients of Medicare reimbursements in 2012. Additionally, cardiologists, cancer doctors, and orthopedic surgeons are among those who received reputably high reimbursements, yet not on par with that of some ophthalmologists. One of the highest billers for Medicare reimbursements, Dr. Salomon Melgen, received nearly $21 million in 2012. Melgen, an ophthalmologist, was investigated by the FBI twice last year, and in a federal audit was shown to have overbilled the federal government by nearly $9 million, an amount that had to be paid back. In spite of the hefty bill for reimbursement, Melgen’s lawyer, Kirk Ogrosky, stated: “At all times, Dr. Melgen billed in conformity with Medicare rules.”

Though Dr. Melgen claims to have conducted himself in accord with Medicare rules, it appears that, all too often, Melgen has remained “reckless” with his money in his leisure. Last year, he lost tens of millions in a wide range of investments, including a Ponzi scheme in 2005, as well as an online fantasy sports investment in 2012, which had cost him about $5.9 million. Furthermore, Dr. Melgen’s firm donated more than $700,000 to Majority PAC (Political Action Committee) during the 2012 elections; majority PAC then proceeded to spend $600,000 to help re-elect Senator Robert Menendez, one of Melgen’s close friends. Though this event does not, in itself, confirm unethical conduct as performed by the physician and politician; it does leave open the possibility that corruption within the health-care system exists.

On the other hand, many of the physicians that had received top billing for Medicare reimbursements in 2012 agreed that the release of Medicare data, with little to no context or explanation is “doing a disservice to all involved.” In fact, many doctors attribute a large portion of Medicare reimbursements to the high cost of pharmaceuticals, and accompanying treatment. Stephen Davidson, an oncologist at the Montgomery Cancer Center, handles more than 40 patients a day for chemotherapy treatments. Oftentimes, though, patients want “the latest drug that’s still under patent because it’s their life.” Some of the drugs that are used, which Davidson states could cost up to $5,000 and $10,000 per week to administer, do add up. For many physicians, the hospital or center that they work for often use both their name and their Medicare numerical code for billing. In spite of the aforementioned billings to Medicare, Dr. Davidson states that his salary remains the same, regardless of the amount of drugs that are administered. Taken without context, however, the data, when applied to Dr. Davidson, would mistakenly attribute the $2.79 million in reimbursements to him alone. Though he is “all for transparency,” Davidson agrees that the numbers are misleading. The stark contrast in the amount paid for certain types of prescription and treatment drugs remains one of the main causes, if not the main cause for large reimbursement amounts.

For ophthalmologists, prescription drugs such as Lucentis and Avastin have proven to be equally effective in combatting age-related macular degeneration. Both drugs share the same manufacturer and similar genetic makeup. One of the differences between the two drugs is that Lucentis is FDA approved. However, the price tags on both drugs are very different, $2,000 and $50 respectively. Accordingly, physicians are reimbursed for the “average cost of the drug, plus 6 percent of the cost.” The way the Medicare system is structured unintentionally sets up a financial incentive for physicians to choose the more expensive drug. Dr. J. Gregory Rosenthal, an Ohio ophthalmologist, states that doctors shouldn’t use Lucentis, and “it has no reason to exist.” In spite of a dozen cases back in 2011 reporting of blindness and inflammation due to a contaminated batch of Avastin, the cheaper drug, remains “enormously safe,” quoting Dr. Peter Pavan, chairman of the ophthalmology department at the University of South Florida’s Morsani School of Medicine. In general, if patients were to use Avastin rather than Lucentis, they would have saved the Medicare program $1.4 billion in 2012.

With respect to the quality of the Medicare data released, Reginald Fields, a spokesman for the Ohio State Medical Association, representing 20,000 physicians, practice managers, medical students, and residents stated that it was “woefully incomplete.” One shortcoming of the data is that it excluded the cost of procedures, which could potentially lead some to conclude that doctors made more money on them than they actually did. Fields notes that it would have been helpful for physicians to review the data before it was released, suggesting that input from physicians would have benefited the accuracy and practicality of the data greatly.

Though many physicians find reason to contest the release of the Medicare data, it is to be noted that there are benefits that patients can garner from utilizing the data in such a way as to aid in finding a physician that they prefer. A key way that the data is useful to patients is by listing the number of procedures done by each provider. Mark Pauly, a health economist at the University of Pennsylvania’s Wharton School, recommends a general rule of thumb, that is, to go to someone who is doing a lot of them (procedures,) rather than a few of them. Analysts, who study costs, also use the data to determine, based off of high-volume, whether the physician might be “very good at their trade.” A doctor who does a lot of a given procedures may simply have a specific area of focus, while others in the same practice have developed other areas of expertise. High billing may indicate a very talented practitioner, for research has found that medical skills tend to improve as physicians perform the same operation multiple times.

As previously mentioned, multiple doctors may be reimbursed through the ID number of one doctor in their practice, which would explain why some doctors may have a larger amount of reimbursements than others. Procedures that were billed to one doctor may actually have been performed by a number of workers in one practice, including medical residents, nurses, and physician assistants. In order to bring some sort of order to the system, one goal for the release of the data would have been to have each individual medical practitioner bill Medicare directly, to allow the government to get a better handle on spending. Dr. Michael McGinnis, a pathologist from New Jersey, is an example of one such case. According to the data, McGinnis was third on the list of highest reimbursements in 2012, with $12.6 million. McGinnis relates that the numbers are correct, yet it is not correct to assume that he received even close to that amount of money. Rather, the amount was billed not only to him, but nearly 30 pathologists who work at the three practices McGinnis runs in New Jersey. Dr. McGinnis could confirm that he was identified as the person being reimbursed the total of $12.6 million because 28 other pathologists at his practices were using his NPI (National Provider Identifier) number. Despite these difficulties, however, McGinnis added: “as far as I’m concerned, any and all data should be available for all people to see.”

Niall Brennan, acting director of the CMS Offices of Enterprise Management, stated: “in general, providers should not be using other providers number to bill.” Furthermore, Brennan also wanted to encourage providers to use their own NPI number, in order to ensure accuracy of Medicare data. Brennan, along with Jonathan Blum, the CMS Principal Deputy Administrator said in their remarks to the media on April 9th that having the data become public was “not only the right thing to do because Medicare is paid for with taxpayer money, but also because having researchers and reporters review the data could lead to exposure of fraudulent billing and of variations in treatment between geographical regions that might warrant changes in policy.” The release of the data will certainly allow taxpayers access to the Medicare information that they are entitled to, while helping the government to expose fraud and inconsistencies by providing the press and researchers with the opportunity to analyze the data to find any outliers in spending that do not appear to be working in the best interest of beneficiaries and taxpayers.

Following the release of Medicare data to the public, many physicians claimed that information contained in the data was an invasion of privacy. Critical response weighed in favor of the notion that such information would potentially incriminate those doctors who are hardworking, putting in 70 to 80 hours a week, and who are earnestly endeavoring to bring satisfactory service to their patients. We find that such reimbursements are a result of the high cost of pharmaceuticals, as well as the incorrect and unregulated usage of one singular provider’s NPI number by other providers. We find, though, that the release of the Medicare data, along integrated search tools, such as those found on the websites of the New York Times and the Wall Street Journal, will prove beneficial to patients who are seeking to find a doctor who is best fitted to their needs. Indeed, the release of the Medicare data has proven to be milestone in health care transparency, yet there remains much work to be done to improve the Medicare system as whole.




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