Are Doctors Garnishing Tax Payments to Recover Funds From Medicare?

June 25th, 2008 by DrRich

The Wall Street Journal recently reported that Congress is urging Medicare administrators to assist the IRS in garnishing payments to doctors (and other “contractors”) who owe federal taxes. The Government Accountability Office estimates that providers owe more than $2 billion in back taxes, and withholding Medicare payments to providers is seen as an expeditious method of collecting those owed monies.

DrRich is shocked (shocked) not only that a body of Solons such as Our Congress could so egregiously misinterpret the actions of forthright American physicians, but also that the WSJ itself (a bastion of American capitalistic thought) could fail to recognize the true nature of those actions.

For DrRich suspects there is an alternative explanation that places the alleged tax deficiencies of American doctors in a somewhat different, and far more heroic, light. Namely, when (if) doctors are withholding tax payments, they are not doing so as common tax cheats. Heavens, no. Rather, they are doing so for entirely justifiable and noble (if illegal) reasons.

First, they are trying to break even. In contrast to what is seen with most of the revered professions (wherein the payment due to the professional is transparently negotiated, or is simply “set” by the professionals themselves according to what the market will bear), the pay of physicians is determined by Acts of Congress. Even now, before the next set of impending, Congressionally-determined physician pay cuts, Medicare does not reimburse doctors enough to cover the overhead of most office visits.* Some say this makes the business of office practice economically dicey. In fact, it is already impossible for a stand-alone, independent primary care doctor to make a living caring for Medicare patients.

Second, Medicare has successfully inculcated the Fear of God into physicians regarding the now-federal crime of healthcare fraud. The penalties for committing healthcare fraud are so onerous that merely being accused of it is enough to induce most physicians to beg for a settlement deal, regardless of the strength of their defense, and regardless of the fact that most such settlements are personally and professionally ruinous. And the opportunities to be accused of fraud are unlimited for even the most fastidiously honest among physicians. (The arcane E&M coding rules, which have been formally proven impossible to follow, afford the opportunity for the feds to point the fickle finger of fraud, quite arbitrarily, toward any American doctor who treats Medicare patients, at any time.) Not wanting to appear fraudulent to Medicare is foremost in the minds of American doctors (which pushes “wanting to help their patients” down to Number Three on physicians’ priority list, right after “wanting to avoid spurious malpractice suits”).

As a result of these two considerations, it is conceivable** that some physicians, wanting to continue the noble practice of caring for Medicare patients, but at the same time wanting to be fairly reimbursed for same (at least to the extent of breaking even), have made a simple calculus. Inasmuch as the government owes them fair reimbursement for services they render to government entitlees, and inasmuch as the government has not been forthcoming with said fair reimbursement (and promises to be even less forthcoming in the very near future), therefore (some physicians may have concluded), they will simply exercise whatever opportunities they may find to recover some of these owed funds on their own initiative. For much the same reason that Congress is proposing to garnish Medicare payments to doctors, perhaps some doctors are garnishing tax payments to the IRS.***

It would indeed be telling if physicians who reach such conclusions (if indeed there are such physicians) have decided to recover funds they feel the government rightfully owes them, not from Medicare, but instead from the IRS. These doctors would obviously have concluded, quite logically, that dealing with the wrath of the IRS is far, far less intimidating than dealing with the wrath of the federal healthcare fraud establishment, whose tactics would make the average American physician beg for the rights and considerations afforded to your average Guantanamo detainee (especially since last week.)

Small wonder that the relatively meek and unassuming IRS has asked for the help of their nastier federal brethren in cracking down on recalcitrant doctors.

Whatever the correct explanation for it, however, the prospect of the IRS and Medicare teaming up in enforcement efforts ought to send chills through every American physician, and should stimulate among them significant second thoughts about their career paths.

Speaking of which, here’s a second thought they should consider, and soon.

*These comments, as usual, pertain almost exclusively to PCPs. Specialists (such as DrRich when he still practiced), are doing just fine, what with the procedure-based reimbursement system their brethren on the RUC have arranged for them. Unlike PCPs, who lose money every time a Medicare patient darkens their door, specialists can make up for lowered per-unit reimbursements by cutting corners and increasing the volume of procedures they perform. It’s not particularly pleasant (or safe), but it is what it is, and the specialists have learned to get by.

**Note to IRS and CMS agents: Hi, fellas. DrRich has no personal knowledge, direct or indirect, of any of this sort of illegal behavior; he is simply taking known facts and extrapolating them to their logical conclusions.

***It is a law of history that bad law and bad regulations eventually create contempt for authority, and progressively render various illegal actions rationalizable, reasonable, justifiable, and finally, ethical. Even those who sympathize with physicians on this matter (and DrRich suspects these are few indeed), would say that that the rationale for not paying owed taxes has progressed certainly no further than the “rationalizable” stage, if that. But the natural tendency of governmental authority to progress toward arbitrariness is the very thing that  led Jefferson to muse that continued societal vitality might require revolutions every few generations. I’m just sayin’.

Posted in Healthcare economics | No Comments »

Covert Rationing Even Wrecks Socialism

December 11th, 2007 by DrRich

Last week, John Goodman wrote a provocative piece about what he’s termed the “nonprice rationing” of healthcare. By nonprice (or nonmarket) rationing, Goodman means the kind of rationing you get when the government, rather than market forces, control the healthcare system - specifically, he’s addressing a system of socialism. He offers five principles of such nonmarket rationing, which I paraphrase here:

1) Any excellence that may exist is not systematic, but instead occurs spontaneously and randomly.
2) Access to this random excellence is not random; the rich and connected are the ones who get it.
3) The skills that allow people to succeed in a market system are the same skills that allow them to succeed in a nonmarket system (i.e., one’s wits will determine one’s access to excellence).
4) Doctors rationing at the bedside will make value judgments about their patients; youthful and highly productive (and presumably influential - DrRich) patients will get an unequal share.
5) People at the bottom of the income ladder will almost always do better in a market system.

To sumarize: Despite the inevitable efforts of the government to homogenize healthcare under socialism, pockets of excellence will still randomly appear. The rich, the connected, and the quick-witted will find those pockets of excellence. So: the same people who are getting decent healthcare today will continue to get better than average healthcare under a government system, and the peons will suffer even more than they do today under a more market-based system (where they at least have a shot).

Goodman also says:

I am probably one of the few people you interact with who has a real interest in understanding nonprice rationing of health care. In fact, I may be the only such person. . . .In fact, I don’t believe anyone has developed a real theory about it.

Readers, please do not think too badly of Dr.Goodman just because he has not yet heard of DrRich or his Grand Unification Theory of Healthcare (GUTH), the theory that explains everything. Dr. Goodman’s a busy man, and DrRich is, well, obscure.

Does the GUTH account for Goodman’s “nonmarket rationing?” Indeed it does. Does it reach the same conclusions as Goodman? Well almost, but not quite.

The difference? Goodman’s formulation could be applied to almost any aspect of a classic socialist system, where virtually all goods and services are controlled (i.e., rationed) centrally. The same five principles (with the possible exception of principle 4, which seems to refer specifically to physicians) would hold under a socialist economy whether you’re talking about healthcare, cigarettes, plumbers, or wheat.

Under a socialist system, there will always be shortages of everything; but on the other hand there also will always be special caches of the rationed item, which somehow will be made more-or-less available to the rich, the connected, or the quick-witted. (The Cuba segment of Michael Moore’s Sicko, for instance, nicely displays the special cache of healthcare excellence that Cuba makes available to the fortunate few, such as American filmmakers bent on embarrassing the Bush administration). This inherent aspect of socialism is merely a concession to reality. Perfect socialism, requiring as it does a fundamental change in human nature, cannot exist. So special caches (whether of gasoline or of medical excellence) will always be permitted to spring up and to persist, at least tacitly. Trading in these special caches, after all, is how the central authorities a) maintain their power, and b) get to have some of the special stuff themselves.

Goodman’s formulation derives directly from the classic behavior of socialist systems, and thus must be correct. And being correct, it must also be compatible with the GUTH; and so it is.

But the GUTH adds a twist. The twist is: We’re Americans, and Americans don’t ration. So the central authorities who control the American healthcare system have got to do the rationing covertly. (In contrast, rationing under classic socialism is quite open.) Covert rationing corrupts everything it touches (Corollary 4 of the GUTH). Ironically, it even disrupts the inherently corrupt style of rationing classically seen under socialist systems.

Goodman points out that under classic socialism,

Since there is no financial reward for excellence and no financial penalty for mediocrity, excellence tends to be the result of the enthusiasm, energy, and leadership of a few people scattered here and there.

That is, socialism creates no incentive for excellence. Whatever pockets of excellence you get will have to be created by a few special individuals who are unusually self-motivated.

What this formulation does not account for is that under the American healthcare system, dedicated as it is to covert rationing, the Wonkonians are aggressively putting into place several powerful reverse incentives. These reverse incentives, we’ve seen (we being readers of this site), are aimed at actively stamping out, eradicating, and punishing any self-motivated physician who tries, despite all obstacles, to deliver excellent healthcare. Among these are the mandate that primary care doctors spend only 7.5 minutes per patient encounter; invoking the magic of P4P to determine exactly what must and must not take place during that 7.5 minutes; grabbing the right to interpret clinical science in order to formulate the “guidelines” that inform P4P; coercing doctors to agree to egregious adhesion contracts that any sane person would find unconscionable; forcing doctors to practice under a set of coding “guidelines” that prevent good patient care and serve as traps for “fraud;” and in general, making every patient encounter subject to a web of regulatory speed traps that force doctors to concentrate on keeping the OIG at bay rather than on what the patient needs. In short, in their efforts to gain control of physicians’ behavior in order to covertly ration healthcare, American Wonkonians are creating insurmountable and systematic disincentives for excellence, and severe penalties for non-mediocrity. They have placed doctors in the untenable position of being utterly unable to fulfill their professional, traditional, legal, and ethical obligations.

The only way doctors will retain a realistic opportunity to achieve excellence under such a system (so as to service at least the rich, the connected and the quick-witted), will be to abandon the system altogether.

Perhaps somebody can purchase an obsolete Soviet aircraft carrier, convert it into a state-of-the art hospital ship, staff it with renegade American physicians, park it in international waters off the east coast, and ferry Congresspersons back and forth by helicopter to receive their well-deserved excellent healthcare. Under a covert rationing paradigm, that might be the only way to fulfill Goodman’s five principles, even if we end up with a fully socialized healthcare system.

Posted in Wonkonian Rationing | 8 Comments »

Another Way to Run Afoul of E&M Coding

December 5th, 2007 by DrRich

Last week, DrRich ranted on the E&M coding guidelines, and attempted to demonstrate how this oppressive and uninterpretable set of rules has harmed patient care, and has exposed many if not most doctors to the constant threat of an unpleasant visit from the Office of the Inspector General.

DB took up the call here, and the Happy Hospitalist (who was the one that rekindled DrRich’s indignation on coding issues in the first place) took up (here) the mind-numbing question of how the resultant codes get converted into physician payments. DrRich doesn’t really expect any of his readers to sort through HH’s explanation of the arcane details of coding. Just realize: Real doctors can’t actually follow these procedures to anyone’s satisfaction.

DrRich does not mean to offend his medical colleagues by claiming they can’t code correctly. He is just stating a fact. There is, in fact, no “correct” way to code, because correct coding is impossible. This verity was proven a few years ago when a group of specialized government-sanctioned coders took a sample of typical doctor-patient visits, coded them according to their own E&M guidelines - and they all got different answers. DB describes this interesting result in an old post, here.

Obviously, any doctor toward whom the fickle finger of fate points the OIG is very likely to be found guilty of abuse, if not fraud. Here’s what happens to doctors who are found to commit coding abuse (that is, who are visited by the OIG):

1) A small sample of their patients’ charts is audited.
2) The error rate is calculated for that sample, then that rate is applied by extrapolation to all Medicare billing the doctor has done for the past 6 years (the statute of limitations).
3) For each violation in coding the doctor is calculated to have committed during those six years, the doctor must pay a) triple the amount of restitution, and b) $11,000.00 (per coding violation).

It is not unusual for audited doctors to be hit with hundreds if not thousands of coding violations over a 6-year period, and the fines will almost always amount to well over 7 figures, if not 8. Even rich doctors usually can’t afford that kind of damage. However - if it’s just abuse the doctor has committed and and not fraud - often the OIG may offer a settlement deal in the low 7 figures.

And here’s what happens if the coding violations are judged to be fraudulent (which, unfortunately, often appears a somewhat arbitrary designation):

1-3) All the above, minus any settlement offer.
4) Jail

So really, at the end of the day we see that the E&M coding guidelines amount to just another iteration of the Wonkonians’ favorite gambit, the Regulatory Speed Trap. Nothing particularly new here.

Except there’s a little twist that makes the E&M guidelines just a bit more interesting than the average RST.

Realizing they’re in a no-win situation, not wanting to attract the attention of the Feds, and wishing to immunize themselves against being judged fraudulently avaricious if they do, many doctors have taken up the practice of routinely “downcoding.” Downcoding is the opposite of upcoding (upcoding being the sin against which the E&M coding guidelines were invented). By routinely billing for Level 2 E&M services (with Level 5 being the highest), these doctors believe they are making a reasonable trade. They’ll accept less money than they deserve, in exchange for less odious documentation requirements, and (they believe) avoiding the deadly scrutiny of the feds. Government agents should consider this capitulation a victory, these doctors reason, since they will be paying out less money than is actually owed.

Such doctors badly misread the purpose of the E&M guidelines. The purpose of these guidelines is not to save money (either by guaranteeing that the documentation matches the coding level, or by scaring doctors into routinely downcoding). The purpose, like any Regulatory Speed Trap, is to create new opportunities for fraud.

This being the case, doctors who downcode - who attempt to remove themselves from the jeopardy of incomprehensible, no-win coding rules - just make the Feds mad.

Accordingly, the OIG has determined that the practice of downcoding, of billing the preponderance of patient encounters as Level 2, constitutes the fraud of “clustering.” Clustering, which is readily identifiable by means of software that looks for more Level 2 codes than average, indicates that the doctor is guilty - of upcoding! The theory here is that if the doctor is billing every patient encounter as Level 2, there are bound to be a few that ought to have been Level 1. Hence, clustering itself constitutes sufficient proof of abuse, if not fraud. Accordingly, clustering is punishable. (In reality, of course, Level 1 clinical services are so trivial that they are almost never seen in clinical practice. “Clustering” at Level 2 is downcoding, not upcoding.)

Doctors whose billing patterns show an insufficient diversity in coding levels, as determined by the Feds’ Secret Software, are therefore guilty. (Nobody should be surprised that the uber-virtue of “diversity” - from which, apparently, the subservient Seven Holy Virtues must spring - even applies to physician billing practices.) Only such diversity, after all, can demonstrate that a doctor is treating the E&M guidelines with the respect they deserve.

So: You can’t win; you can’t break even; you can’t even get out of the game.

Unless, that is, you really get out.

Posted in Wonkonian Rationing, Primary Care in America | 3 Comments »

E&M Guidelines and Patient Care

November 28th, 2007 by DrRich

The Happy Hospitalist has posted on the mysteries of documenting for Medicare that one deserves reimbursement for delivering medical care to a patient. HH’s description of the documentation hoops through which physicians now must jump is detailed enough that it’s actually difficult to read. Which is the point.

The E&M (”evaluation and management”) guidelines, introduced in 1995 and revised in 1997, apply to the documentation that physicians are now obligated to provide in support of their Medicare billing. For every patient encounter, doctors are required to write a “note” that fully justifies the billing code they are using (of which there are five levels). The E&M guidelines are part of the government’s fraud reduction activities, and ostensibly reduce the opportunity for fraudulent billing. This, on its face, seems fair enough.

But through their utter opacity and complexity, only partially reflected by the 48 pages of dense prose that comprise them, the E&M rules (in government parlance, “guidelines” are always “rules”) in fact greatly magnify the doctor’s opportunity for making inadvertent documentation errors, and thus of producing a “fraudulent” bill. (As nearly as DrRich can tell, all the government’s anti-fraud initiatives actually create new regulatory speed traps for unwary doctors.)

HH’s post nicely demonstrates how writing a progress note according to the the E&M rules requires assembling a complicated set of “elements” from Column A and Column B, as from a Chineese menu, for each of four subject areas of the patient encounter - the history, the physical exam, the assessment, and the plan. Then somehow, one must translate the result (which reads like a computer-generated form letter) into the proper, fully-supported billing code.

Even if this mess led to a straightforward means of determining proper billing codes (which it does not), it results in a medical progress note that is virtually undecipherable. This means that when another doctor (or even the same doctor on a different day) tries to read the progress notes to figure out what’s been going on with the patient (which used to be the point of medical progress notes, before they became primarily a vehicle for auditors), they cannot.

When the E&M guidelines were first introduced, they were recognized immediately by doctors as a complete abomination. Indeed, the great hue and cry from angry physicians (and the arrival on the scene of a new Republican administration) caused the Secretary of HHS to appoint a special commission to review the E&M guidelines in 2001. The commission concluded that indeed, the E&M guidelines were entirely counterproductive to patient care, and in June, 2002 voted (20-1) to recommend abandoning them altogether.

But HHS declined to follow the recommendations of its own commission, instead leaving the E&M guidelines in force “temporarily,” and vaguely promising to revise them “soon” in order to make them less dangerous to patient care - knowing full well that the saurian lassitude of the bureaucracy would easily outlast the fleeting indignance of the medical community.

Accordingly, not only has HHS failed to take (or, alternately, succeeded in not taking) steps to revise the E&M guidelines, they also have vigorously pressed forward with audits and prosecutions for the federal crime of healthcare fraud, based on physicians’ inadequate compliance with them. And, as the bureaucrats must have predicted, there has not been any substantial noise from doctors about revising these guidelines for several years now.

What’s more - judging from the current aspect of younger doctors, exemplified, DrRich supposes, by the Happy Hospitalist - there never will be. For the E&M guidelines - while still hated - have been fully absorbed into modern medical practice; they are just another of the multitudinous impediments that various entities have busily created in order to obstruct decent patient care, just one of the countless absurdities one must live with if one wants to practice medicine in the U.S.A. The E&M guidelines, in other words, have become normal.

Accordingly, a multimillion dollar industry has sprung up to help physicians better comply with these coding guidelines (or rather, to teach them strategies for avoiding federal audits, since nobody can truly comply with undecipherable guidelines). Physicians across the country are spending the time and money allotted for their continuing medical education learning to become better accountants, rather than better physicians.

And so, the E&M guidelines have become just one more example of how covert rationing (in this case, promulgated as a means of further controlling physician behavior, even at the cost of explicitly and “officially” harming patient care) invariably leads to increased complexity, opacity and waste.

Posted in Wonkonian Rationing, Primary Care in America | 3 Comments »