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 E&M Guidelines Undermine Patient Care, and That's The Point [14:43m]: Play Now | Play in Popup | Download (29)

Since the late 1990s, American physicians have labored under a set of tortuous documentation requirements imposed upon them by our government. The E&M guidelines (for “evaluation and management”), apply to the documentation that physicians are now obligated to provide in support of their Medicare billing. The E&M guidelines, first instituted in 1995 and revised in 1997, were part of the Clintons’ great fraud reduction initiative. Ostensibly, the strict documentation requirements reduce the opportunity for fraudulent billing.

While doctors initially railed against the E&M guidelines, they now suffer them in relative silence. The E&M guidelines have become, in fact, just one more hurdle which doctors must navigate as they pick their way through the vast obstacle course that now defines the practice of American medicine. Indeed, younger doctors accept the odious documentation requirements as a matter of course, knowing nothing better, just as children born into the direst third-world slums accept their abject poverty without notable complaint.

But occasionally, physicians of a certain age, dimly remembering how it ought to be, will still complain about these guidelines. One of these is revered fellow blogger DB, who (unlike DrRich) is still in the trenches, and must deal with – and try to teach trainees how to navigate through – this abomination on a daily basis. Accordingly, DB is periodically moved to remind us of what he graciously believes to be the unintended consequences resulting from the E&M guidelines, which is to say, DB seeks to remind us that current medical documentation requirements get in the way of good and efficient patient care.

For some, however, even this sort of mild-mannered, exceedingly polite objection is not to be countenanced. One of DB’s correspondents fired back at him:

“The templates are there to serve as a guide, not a hinderance. If you don’t like your “guide” then work to change it. You shouldn’t look at this “guide” as a form of billing, but rather as a guide in making sure you have covered your bases when seeing the patient. Proper documentation can lead to quality care and positive patient outcomes.”

This, indeed, is the official government position on E&M guidelines. It is so official, in fact, that it moves DrRich to wonder whether Cass Sunstein has actually implemented his well-documented anti-conspiracy strategy, and thus has dispatched armies of government-approved agents to monitor and actively counter “untruths” which are unfriendly to government aims, wherever they are found.

In any case, DrRich is not as polite (or as circumspect) as DB, and so he will say it outright.

The E&M guidelines were established for the specific purpose of controlling the behavior of physicians, to further the goals of covert rationing.

First and foremost, they create a Regulatory Speed Trap of the first order, so that with each and every patient encounter the item that will be foremost in the physician’s mind is not the needs of the patient, but in filling out the complex documentation in such a way as to avoid the appearance of committing a fraud. In practical terms, this means filling out the documentation so as to blend in with the masses, so that one’s records will be passed over by the sharp eyes of the greedy forensic accountants (who are paid by commission for detecting instances of substandard documentation, which are now construed as “fraud”), or even worse, by the sophisticated software now being deployed to detect ever-more nuanced gradations of “outliers.”

A classic post by The Happy Hospitalist describes the mysteries of E&M documentation better than any other attempt DrRich has seen. 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.

Through their utter opacity and complexity, only partially reflected by the 48 pages of dense prose that comprise them, the E&M rules (for “rules” is what they are) in fact greatly magnify the doctor’s opportunity for making inadvertent documentation errors, and thus of producing a “fraudulent” bill. HH’s post nicely demonstrates how writing a progress note according to the E&M rules requires assembling a complicated set of “elements” from Column A and Column B, as from a Chinese 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 – and often is – 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. Compliance with the E&M guidelines can thus actively confound patient care.

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 indignation of the medical community.

(This simple example ought to teach us how difficult it will be to roll-back any of our new healthcare reforms in the future, even ones that are officially deemed to be harmful.)

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, there never will be. Save for the occasional exhortation from an old fossil (sorry, DB), the E&M guidelines have been fully absorbed into modern medical practice. They have become normal.

Accordingly, a multi-million dollar industry has sprung up to help physicians better comply with these coding 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.

Which brings DrRich to his last point: It is not actually possible to follow the E&M guidelines to anyone’s satisfaction.

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. (The results of this study were published in the Annals of Emergency Medicine in September, 2002.)

Obviously, then, since there is no “right” way to comply with the coding rules, any doctor toward whom the fickle finger of fate points the Feds is very likely to be found guilty of abuse, if not outright fraud. And what we’ve got here is a well-documented, openly acknowledged, peer-reviewed and published Regulatory Speed Trap.

Here’s what happens to doctors who are found to commit coding abuse (which is to say, to any doctors who are visited by Federally-sanctioned auditors):

1) A small sample of their patients’ charts is audited.
2) The error rate (with the auditor determining retrospectively what an error is) is calculated for that sample, then that rate is applied by extrapolation to all the 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 not fraud – often the Feds 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.
4) Jail

In summary, DB makes a very legitimate point, and has made this point several times over several years. Namely, the E&M coding rules are highly counterproductive to patient care. They produce medical records that are fundamentally undecipherable regarding actual medical content, even by medical professionals; and they distract physicians, with every patient encounter, into a fraud-avoidance exercise.

Sadly, however, DrRich does not believe that merely pointing out the harm being caused to thousands of patients each and every day by the E&M guidelines will do any good. Believing that it might do some good to call the Feds’ attention to it assumes that the harm is an unintended consequence, or at least, that it would be considered too high a price to pay.

This, DrRich feels obligated to reiterate, is demonstrably not the case. The Feds know that the E&M guidelines are harmful to patient care. Their own commission came to that very conclusion in 2002. The Feds know that failing to comply perfectly with the E&M guidelines in each and every case does not really indicate fraud and/or abuse, but is the necessary outcome when you institute a complex set of rules that not even the government’s own coders can interpret. Reminding the Feds of these facts, in public, may make them angry, but it will not change their position on E&M guidelines.

That the Feds continue to impose the E&M guidelines on physicians, despite the harm that they know this causes, tells us something very important about their underlying motives. When you are in the business of covertly rationing healthcare, controlling the physicians is Job One. And as George Orwell observed for us, when you want to control the behavior of some population, a critical step is to control the mode, the rules, and even the very language of communication.

That physicians continue to comply with such oppressions, despite the harm they know this causes, and (with notable exceptions) without serious complaint, tells us something important about them, too. DrRich would rather not say what that is.

________________________________

Now, read the whole story.

DrRich explains it all in, Fixing American Healthcare – Wonkonians, Gekkonians and the Grand Unification Theory of Healthcare.

Now on Kindle!

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 Medicare Already Does It (Limiting Individual Prerogatives, Part 4) [12:33m]: Play Now | Play in Popup | Download (32)

Part 1 of Limiting Individual Prerogatives

Part 2 of Limiting Individual Prerogatives

Part 3 of Limiting Individual Prerogatives
____________

DrRich could go on and on about how our government is intent on restricting the right of individuals to spend their own money on their own healthcare, but (for now, at least) this will be the final post in this series. DrRich has made his point.

Even some of his critics, who have accused DrRich in the past of being overly paranoid on this topic, seem to have gotten it. Some who previously were quite vocal have remained suspiciously silent. Others have fallen back to quasi ad hominem accusations (suggesting, for instance, that DrRich must be a follower of Mr. Beck, with all the horrific connotations that condition entails). And then there is the esteemed Praveen (author of the excellent True Cost Blog), who conceded as follows: “Massachusetts’ attempt to ban direct pay is both unfortunate and unconstitutional. Perhaps you’re right, and the bureaucrats are sneakier than I think.”

So maybe DrRich should just declare victory and move on.

But it is important to make one final point, namely: the notion that our government is intent on limiting our individual healthcare prerogatives is far more than just one of DrRich’s theoretical constructs. Indeed, our government has been acting on this intent for over 15 years. The main case in point, of course, is Medicare.

It has always been recognized that every American citizen “is the proper guardian of his own health,” (Supreme Court Justice Joseph Story, 1873), and accordingly, has a natural right to employ his own individual resources to that end. Roe v. Wade, for instance, was a particularly explicit recognition that a woman has a fundamental right to purchase medical services which she determines to be necessary for her own well-being.

Indeed, when Medicare became law in 1965, Congress also explicitly recognized this right, stipulating that nothing in the new law “shall be construed to preclude [an individual] from purchasing or otherwise securing protection against the cost of any health services.” (DrRich reminds his readers once again that a bold, restrictive statement like this, appearing in legislation, generally heralds an outcome opposite to the statement itself.)

DrRich has already pointed out that under Hillarycare, private medical practice would have been nearly criminalized out of existence. So one ought to expect that the Clinton administration would view an individual right to purchase healthcare as a threat. And indeed, it did. But, as it happens, the erosion of the rights of Medicare “beneficiaries” began even before the Clinton administration. (And even again, DrRich must remind his readers that any universal healthcare plan, even under a Republican administration, will always tend to limit individual liberties.)

In 1991, Medicare administrators published a “carrier bulletin” warning physicians that direct-pay contracts between patients and doctors were strictly prohibited, unless the contract was initiated solely by the patient, and even then, payment rates must be set by Medicare, and further, if the patient later became dissatisfied with that (patient-initiated) contract, Medicare would severely (and retroactively) sanction the physician.

When physicians sued Medicare to prevent this odious new policy from being implemented (Stewart et al. v. Sullivan), the government took the position that it had, in fact, not made any new policy after all, arguing that stuff that shows up in its “carrier bulletin” doesn’t really count. But once this argument was successful in having the lawsuit thrown out in a summary judgment in 1992, Medicare then cynically turned around and immediately made that selfsame new policy “official,” by publishing it in their 1993 Medicare Carrier’s Manual.

But the Feds were still not satisfied. The new, restrictive policy technically still allowed private-pay contracts, as long as the patient initiated them. So the Clinton administration engineered an amendment to the Balanced Budget Act of 1997 – Section 4507 – which prohibited any self-pay contracts whatsoever between Medicare patients and their doctors for medical services which are covered under Medicare. Under Section 4507, which is still the law today, if a doctor provides even one self-pay medical service to a single Medicare patient, that doctor is punished by complete banishment from the Medicare program for at least two years.

The federal government was eventually challenged again in court over Section 4507, but that lawsuit was also thrown out in a summary judgment. The rationale the government offered to the court in justifying its restrictions on individuals’ prerogatives, however, is instructive: “…what you will have is a system whereby the rich can buy what they want and those many beneficiaries who are on fixed income will not be able to afford those services” (United Seniors Association et al. v. Shalala). So again, the interest of the collective (“social justice”) was invoked to justify a law which stifles an individual’s fundamental right to purchase medical services he or she determines to be necessary for his/her well-being.

In any case, since 1997 Medicare patients have been able to purchase Medicare-covered services for themselves ONLY if they obtain that service from a doctor who agrees to opt out of Medicare entirely. This severely limits a patient’s opportunity to self-pay for covered services. The fact that Medicare patients can still buy these medical services from direct-pay physicians, however, is one reason the government hates direct-pay practices, and wishes to stamp them out. More importantly, while some primary care physicians have indeed opted out of Medicare in order to establish direct-pay practices, this path is not a realistic option for medical specialists. So in practical terms, the only “covered services” available for self-pay by Medicare patients, on even a limited basis, are primary care services.

There are several legitimate reasons a Medicare patient might want to self-pay for a medical service that is covered by Medicare. If Medicare “covers” heart valve surgery, for instance, a patient might want to pay for a new, minimally-invasive surgical approach that is inadequately reimbursed by Medicare, rather than the big, open-heart surgery that Medicare reimburses fully. Or, one might want to self-pay for “covered” psychiatric care, or for treatment for a venereal disease, in order to keep embarrassing or harmful medical records out of government-controlled databases.

Furthermore, it is important to recognize that just because a healthcare service is “Medicare-covered” does not mean that it will be covered for a given patient. Whether a specific individual is covered is often determined by a “medical necessity” ruling, made by a bureaucrat. Section 4507 essentially precludes a patient’s ability to purchase a denied (but “covered”) medical service, no matter how badly they want it, or believe they need it.

One can argue, and with some merit, that at this juncture denials of medically necessary services by Medicare have been relatively judicious, and therefore that the “Section 4507 rule” has not had much of an actual impact. In fact, it is likely that most Medicare beneficiaries do not even know that this rule exists.

But while its impact might be relatively small so far, the Section 4507 rule has now been in place for 13 years – it is well-established. So, once Medicare begins reducing reimbursements to physicians and hospitals, to the point where they can no longer afford to offer certain services to Medicare patients (and Medicare has just recently begun doing so, specifically, for some cardiac imaging studies), those patients will be left in the cold. Services which are officially “covered” by Medicare, but which are reimbursed at such a low rate that they cannot actually be provided to them, will become unavailable even to Medicare patients who are willing and able to pay for those services.

DrRich’s main point, once again, is that our government has a deep and abiding need to limit our individual prerogatives when it comes to our healthcare, and has been acting on that need for a long time. The principle for these limitations on our individual liberties, the principle of social justice, has already been established, and has survived court challenges.

Extending these limitations on personal liberties to Obamacare, and broadening their usage, will not require any major changes in direction, or principles, or policy, but will merely require an expansion of already existent – and even “venerable” – rules, rules which have been an established part of Medicare for many years.

DrRich has expressed the idea that such restrictions by our government on such fundamental individual liberties are a very big deal indeed, and, in fact, signal an end to the Great American Experiment. His critics admonish him, however, that he makes too much of it, that, presumably, our government in its benign wisdom is just doing what’s best for us.

DrRich begs his readers to forgive him if he sees, in such a reply, even more evidence that the only nation in the history of mankind to be founded on the principles of individual freedom is well on the way to abandoning those exceptional principles, for the sake of the same, soothing-but-empty blandishments that have been offered, throughout human history, by well-meaning people who end up producing – or becoming – tyrants.

DrRich is not smart enough to predict what specific bribes, threats or subversive parliamentary maneuvering will finally win passage of the President’s healthcare reform. However it comes about, DrRich thinks the result will be bad.

DrRich arrived at this opinion through a long process, lasting many years, that changed his thinking on the proper role of our government in our daily lives. One key event within this long process, which he related in his book, first opened DrRich’s eyes regarding the essential benignity of our government as it administers its assumed role as guardian of the people’s healthcare.

DrRich reproduces this vignette here:

One afternoon in June of 1994, I was summoned to a meeting by a vice president of the hospital for which I worked at the time. Meetings, especially unannounced ones, are the bane of employed physicians; but this one, I was led to understand, was mandatory.

I found the meeting room filled with high-ranking hospital administrators, hospital attorneys, and my clinical chairman. A gathering of luminaries such as these, especially on short notice, was decidedly rare. As I walked into the room all eyes were on me. I knew all these people; they’d been my friends and colleagues for years. We’d been fighting the healthcare wars side by side. But now they studied me as if seeing me for the first time.

“Who died?” I asked, just to break the ice.

“To be determined,” responded one of the lawyers.

They got right down to business. The chief hospital attorney explained: The federal government, in the guise of the Office of the Inspector General (OIG), had launched a major investigation of allegedly improper Medicare billing practices related to the use of investigational implantable cardioverter defibrillators (ICDs) in the late 1980s. This investigation, I was told, had begun as a whistleblower law suit out on the west coast, and the feds were now expanding their inquiry. The OIG had just subpoenaed records from approximately 120 of the largest hospitals in the country that implanted ICDs. We were one of the 120.

Now I understood why I was here. As Chief of Cardiac Electrophysiology, research with the ICD was one of the major endeavors of my career. The ICD is a device that is designed to prevent sudden death in patients whose cardiac disease makes them susceptible to such an event. Once implanted, the ICD recognizes the sudden, lethal heart rhythm disturbances that cause nearly instant death, and automatically delivers a shock to the heart to restore it to a normal rhythm. It is a remarkably effective device, and was obviously so from the very beginning. Seldom, in fact, has a more dramatically effective life-saving therapy ever been devised for any illness or disease. For this reason, as long as I had access to these devices I (and most electrophysiologists), felt morally obligated to offer them to any eligible patients who were at high risk for sudden death.

So now I understood why I had been summoned to the meeting. What I didn’t understand was why the Feds thought we’d done anything wrong.

“We shouldn’t have any problems there,” I protested. “You’ll recall that we looked into the legality of billing for ICDs back in ’87 when I first started working here. And Medicare said it was okay.” While I was an employed physician (and so the hospital handled all the billing for my services), I’d had enough concern about billing Medicare for investigational devices that I’d insisted the hospital get clarification from our Medicare Intermediary (the local agent and representative for Medicare) on the matter.

One of the attorneys answered. “That’s right. The Medicare Intermediary indicated at the time that there was nothing illegal about billing for the ICDs, but couldn’t guarantee they’d pay for them. As it turns out, they’ve paid for each one we’ve implanted, and never questioned our using them.”

“Then what’s the problem?”

“Medicare now says we’ve been in violation by sending the bills,” the lawyer replied. “There’s apparently an obscure instruction in the Intermediary’s guidebook that prohibits billing for some investigational devices.”

“But we got clearance from the Intermediary,” I protested.

“And that’s the defense we’ll take. The Intermediary itself didn’t know about this instruction. But unfortunately, Medicare operates a little like the IRS. If you call the IRS with a tax question and they give you bad advice, it’s your fault if you follow that advice. The fact that the Medicare people were unaware of their own rules, and apparently told us the wrong thing, doesn’t absolve us.”

“So what’s the worst case scenario?” someone asked. “That we’ll have to pay all the money back?”

“The monetary penalties are much worse than that,” intoned the CFO. “We’re looking at over 100 investigational ICDs that the good doctor here has implanted,” he said, glaring at me. “And at about $25,000 each, that’s a pretty penny right there. But the Feds are also talking about a $10,000 fine per incident, plus triple damages, so we’re really looking at several tens of millions of dollars we can’t afford. What’s worse, the fact that the OIG joined the whistleblower’s actions suggests that they’re going to claim we intentionally violated Medicare regs – which could mean jail time.” He was looking at me again when he said “jail.”

“Don’t worry,” a vice-president said to me sympathetically. “We’re all in this together. We’ll help you as much as we can.”

“What do you mean, you’ll help me?” I shot back. “I just work here. You do all the billing, keep everything you collect, and pay me a paltry salary.”

“Like I said, we’re all in this together. But those bills do go out under your name, Dr. Fogoros. As far as Medicare is concerned, they’re your bills.” As I’ve since learned, when the feds begin pointing their fickle finger, it’s customary for everybody to dive for cover.

For the next two years my life was plagued by a series of complex machinations – legal probes and parries – made in response to the Feds’ investigation of our supposed “fraudulent” submission of bills. I won’t bore you with the details – I’ll just hit a few highlights.

First, my hospital threw in with two dozen other large hospitals from all over the U.S. that were also affected by the OIG’s subpoena, and together we hired a fancy inside-the-beltway law firm that specialized in healthcare law. These attorneys ultimately determined that the obscure regulation the OIG was invoking against us had itself been illegally promulgated, and therefore should not be enforceable. Accordingly, our hospitals sued Donna Shalala, Secretary of Health and Human Services (HHS) in federal court to prevent her from enforcing this obscure, previously unknown, and (we held) illegal rule. “We have maybe a 50-50 chance of winning this suit,” I was told by one of our attorneys, “but it won’t be settled for years.”

While all this was going on, the subpoenaed hospitals also lobbied Congress to act on the essential unfairness of it all. “Look,” the hospitals said, “we’ve got one agency of the federal government (Medicare) coming after us for doing research that had been duly approved by another agency of the federal government, the Food and Drug Administration (FDA). We need laws to make the Feds behave consistently. When the FDA approves clinical research, Medicare should allow patients to avail themselves of that approved research.” Finally, in November of 1995, Congress passed just such a law. “So we’ve won!” I exulted when the hospital attorney called me with the good news. “Not exactly,” was the reply, “The OIG prevailed on Congress not to make the law retroactive. So the OIG is still coming after us for what they say we did in the 1980s.”

Then, in January of 1996, the Feds launched a new attack. Senator Roth, Chair of the Senate Finance Committee, decided it would be in somebody’s best interest to have a showcase hearing, highlighting the grievous crimes against Medicare that are being promulgated by avaricious physicians and institutions like me and mine. So the Permanent Subcommittee on Investigations sent subpoenas to the CEOs of several hospitals from the OIG’s list of 120, mandating that they appear before that committee on Valentines Day (i.e., heart day) to answer questions regarding the allegations that we’d committed Medicare fraud in our use of the ICD. It was to be a real circus – it was to be covered on C-SPAN, with major networks in attendance and lots of national publicity. The works.

Immediately, there was a mad rush to have the subpoenas quashed. All the hospitals from states whose Senators were members of the Finance Committee managed to be excused from appearing. At the end of the day, only four hospitals remained. Mine was one.

I was sure my career had ended. My family, friends, patients and colleagues were about to see the CEO of my hospital appearing before a hostile Senate Investigational Committee answering questions on the Medicare fraud that I supposedly had committed. I knew it didn’t matter that I hadn’t done anything wrong. Truth is only a compilation of some facts, whereas perception is everything.

I spent two days in Washington helping the fancy beltway lawyers prepare our CEO for his testimony. I failed miserably in my emotional pitch to be allowed to testify in his stead (the CEO had been subpoenaed, not me; and besides, anyone who seemed eager to testify before Congress must be crazy enough to get us in trouble). But at least I managed to convince the CEO that we should take a hard line with the subcommittee. After all, we had truth, righteousness, ethics, and possibly even the law on our side. We shouldn’t allow ourselves to be intimidated.

Each witness was to be permitted to read a statement into the record before the questioning began. Our attorneys had prepared a 10-page statement that was vague, wishy-washy, filled with legalese, and as nearly as I could tell, didn’t deny wrongdoing as much as it promised we’d be more careful next time.

So I prevailed on the CEO to tear up this lawyered-up document and instead use a one page statement that I wrote for him, saying, in essence: 1) We implanted investigational ICDs in Medicare patients because they were at high risk of dying without them, and to withhold such life-saving devices when they were available to us would have been unethical and would have constituted malpractice. 2) Before implanting the investigational ICDs, approval for their use was obtained through the FDA. 3) Before billing for the investigational ICDs we asked for and received clearance to do so from our Medicare Intermediary. 4) The records and documents we sent Medicare in support of our billing for these ICDs clearly indicated that the devices were investigational, and yet Medicare reimbursed us each time, over a period of several years and without questioning our actions or our bills. 5) The rule Medicare is now invoking was unknown to us during this period of time, and also, apparently, was unknown to the Medicare Intermediary. 6) In any case, as we have asserted in federal court, that regulation was illegally promulgated, and is therefore not a legal rule. 7) Congress has agreed that regulation to have been at least an ill-advised one, as evidenced by the fact that Congress recently passed legislation that now renders that regulation illegal, whatever its previous legality. 8] If they now assert that our actions constitute fraud, then the message the OIG, Medicare and the Senate subcommittee is sending to the public is that doctors and hospitals are expected to discriminate against the elderly, and will be called to task by the federal government if they refuse to do so. 9) Thank you for your attention.

The hearing was indeed quite a show. The whistleblower himself was the first witness, and he entered the chamber wearing a hood to hide his face, sat behind a screen, and spoke with his voice electronically distorted. This was the first time in history, I was told, that a witness had appeared before Congress disguised in this way, except in hearings featuring Mafia turncoats, drug lords, and the like. The implication, I presume, was that I and my fellow cardiac electrophysiologists were no less evil or potentially violent than other, more famous sorts of felons; and that if we learned this guy’s identity his life wouldn’t be worth a nickel.

Then it was us perpetrators’ turn to testify. The CEOs of the other three subpoenaed hospitals, after reading their lengthy, lawyerly and seemingly contrite statements into the record, were grilled mercilessly by the Senators of the subcommittee. Our CEO was the last witness. Once he read our brief but much more aggressive statement, the Senators seemed not to have any substantial questions for him. His testimony was over almost before it had started. Our hard line had paid off.

One more blessing occurred on that day. Somebody apparently found some Whitewater documents that weren’t supposed to have existed, so ten minutes before the hearing, C-SPAN pulled out and went running down the hall to televise the Whitewater doings. All the other news media went with them. Our hearing, despite the big build-up, the dramatically disguised whistleblower, and the fact that it was Valentine’s Day, barely made the news. The lack of national news exposure (and as a result, the lack of local news coverage) spared my reputation and that of my hospital.

Then finally, later in 1996, a federal judge ruled in our favor in our suit against HHS – the regulation Medicare was invoking, the judge ruled, had indeed been illegally promulgated. The OIG still didn’t give up, but in the end offered a settlement deal to the hospital for a mere million or two (which, by this time, was less than we had already spent defending ourselves), and nobody would have to admit to wrongdoing or go to jail or have a criminal record.

DrRich is not complaining. This episode could have turned out a lot worse. And the whole ordeal provided him with enough amusing anecdotes to last a lifetime. But having the Feds coming after him for more than two years was truly an eye-opening experience.

As DrRich sees it, the rightness of his actions seemed completely obvious. He had used those ICDs because his high-risk patients needed them, and from every indication their usage was legal and proper. But, in the service of his patients he had failed to discover a vague, obscure and difficult-to-interpret rule that existed in the Medicare Intermediary’s guidebook (a guidebook to which he had no access). As a result DrRich had been caught up in the Fed’s great anti-fraud initiative.

For over two years DrRich could never be sure of what was going to happen to him. There were periods of days at a time, usually just after another round of legal punches and counter-punches, when there was little else he could think of. (Would he lose his job, his career, his reputation, all his worldly possessions – would he go to jail?) During those times DrRich was of little use to anybody – colleagues, family or patients.

Of course, in the end it all turned out just fine – but the reason for the favorable outcome wasn’t that the Feds finally agreed that DrRich’s actions had been appropriate and non-fraudulent. It was because his lawyers had found a legal technicality in the Fed’s own actions. Had it not been for this entirely fortuitous discovery, who knows what might have happened?

So DrRich has seen a side of the Feds that most doctors have not, and he is willing to admit to a more robust paranoia on the subject than most would have at this moment. The way it looks from here, the government – at least sometimes – is willing to go to great lengths to prove just how rife with fraud is our healthcare system, and, once the Feds set their sights on an alleged perpetrator, they are pleased go to equally great lengths to bring that supposed perpetrator down. At least sometimes they’re willing to base their prosecution on bad rules that are poorly written, illegally promulgated, and hidden away in obscure manuals; they’re willing to ignore the fact that the alleged perp had relied on advice from the Feds’ own agents before proceeding; they’re willing to summon that perp before a televised, circus-like inquisition to be publicly humiliated for actions that, just a few months earlier, they themselves had passed explicit laws to endorse; and they’re willing, when all legal justifications for their persecutions have at last been taken away, to make a final demand, that some might consider extortionate, for a cash payment before they’ll go away.

At least, that’s how it looks from here.

It is not DrRich’s position that the Feds have been engaging in an unmitigated orgy of illegitimate anti-fraud activities over the past dozen years or more. He is sure they have not. Indeed, most of the anti-fraud activities the Feds have undertaken have undoubtedly been legitimate and useful. Furthermore, DrRich fully understands that any get-tough government initiative – whether it be anti-fraud or anti-terror – has got to have teeth, and that it is natural if regrettable that occasionally, a few innocents will be ensnared in such efforts. DrRich admits the possibility that his frightening experience may represent nothing more than the collateral damage that will naturally happen whenever the sovereign power finds it necessary to wield its great hammer in the overriding interest of the public good.

But forgive DrRich if he believes it is more likely that the experience he has just related represents instead an early glimpse into the government’s methods of intimidating and controlling doctors who, without these kinds of necessary checks, will, in caring for their patients, simply keep doing whatever they’d like with the government’s money. DrRich happens to believe that the utter unpredictability, arbitrariness, doggedness and seeming absurdity of the government’s actions in his own case was not accidental. These techniques are essential to the Feds’ goal of keeping their prey (i.e., physicians) intimidated, completely off balance, and in their thrall.

As evil as we all know the health insurance industry to be, DrRich (and any physician who knows anything about it) would much rather attempt to appeal to/defy/maneuver against/manipulate private insurers for the benefit of their patients (since the worst these entities can do is withhold payment), than do anything whatever – either for the patient’s benefit or for any other reason – that would risk engendering the enmity of the great, slavering, merciless sovereign authority.

Just a thought, as we embark on our new government-controlled healthcare system.

In what has quickly become a bad habit, DrRich once again provides a misleading title. Obviously, there’s plenty of waste and inefficiency in our healthcare system, enough to suit almost any taste, and DrRich deplores every bit of it.

Indeed, DrRich strongly suspects that at least 20 to 30% of all healthcare spending is completely wasted, and has seen claims (masquerading as proof) that the actual value is as high as 50%. So again, despite the title of this post, no matter how you look at it there is plenty of waste and inefficiency to go around.

It’s just that there’s not, well, enough.

Before you go away mad, let DrRich quickly explain (quickly, at least, for DrRich) what he means here. Healthcare reform is in the air, and we all know that any effective healthcare reform is going to have to find a way to control healthcare spending. And a central assumption of any reform plan yet proposed is that we can control spending by eliminating – or at least substantially reducing – the vast amount of waste and inefficiency in the healthcare system. Some propose to do this by incorporating the efficiencies of the marketplace (though these individuals have now been run out of town and won’t be bothering us anymore), some by adopting and enforcing stricter regulations, others by introducing a single payer healthcare system, and still others by mandating new technologies such as electronic medical records. But one way or another, each scheme for reforming healthcare proposes to bring spending under control by reducing waste and inefficiency.

Another way of describing what the reformers are telling us is: There is so much waste in the system that we can avoid healthcare rationing by getting rid of it. Most Americans believe this. Most policy experts believe this. DrRich suspects that even most of his loyal readers believe this, despite what he’s been telling you all this time.

But this is unfortunately false. No matter how much waste and inefficiency you think might be plaguing our healthcare system today, there’s not enough to explain the uncontrolled rise in healthcare spending we have been seeing for decades, and therefore, not enough to allow us to avoid rationing altogether.

And in this sense, there is not “enough” waste and inefficiency in healthcare.

DrRich has tried to explain this before, but he will now try to do it better, because it’s important. He will do it using one of the three universal languages, the language of Math (the other two being the language of Love and the language of Healthcare Rationing, both of which are encumbered by expressions of impassioned pledges, heartfelt exaggerations, and other blandishments, and are thus unsuited to a sober discussion of unpleasant truths).

But first, there is an underlying concept we must agree upon, a concept our political leaders are loath to address. To wit: The real fiscal problem with our healthcare system is not simply that we’re spending a lot of money on healthcare, or even that we’re spending a large proportion of our GDP on healthcare. Surely, if we simply had to live with continuing to spend 15% of our GDP on healthcare, we could figure out a way to do that. But that’s not really the problem. The real problem is that healthcare expenditures are growing at a double digit rate of inflation, several multiples faster than the overall inflation rate, such that, over time, an ever larger proportion of our annual GDP is being consumed by healthcare expenditures. Unless this disproportionate rate of growth is stopped, eventually healthcare spending will consume our entire economy. (Rather, what will actually happen is that it will grow to the point of producing societal upheaval, sending us back to a more typical era for mankind, where healthcare is a little-thought-of luxury, and not a necessity or a right. This will happen well before healthcare consumes 100% of the economy.)

To reiterate, it’s not the amount of spending on healthcare that is creating a fiscal crisis, it’s the rate of growth of that spending.

There are only two things that can possibly account for this excessive inflation in healthcare expenditures. Either it is caused by unrelenting growth in wasteful spending (as we are assured by our political leaders), or it is caused by unrelenting growth in useful healthcare spending. If it is the latter, then in order to get spending under control we must ration. So therefore (we all fervently pray), the rate of growth must be caused by wasted spending.

This desired conclusion, unfortunately, leads to mathematical absurdities, and therefore (for anyone who eschews magical thinking) turns out to be utterly false.

DrRich is going to show you data from a spreadsheet. It illustrates what would have to happen in order for wasteful spending to account for our current healthcare inflation. The spreadsheet is based on the following four assumptions:

Assumption 1) The proportion of healthcare spending today that is wasteful is taken as 25%. The actual number, of course, is not possible to discern with any real confidence. It depends, for one thing, on who gets to define “wasteful.” If I’m a 92-year-old man who gets a $12,000 stent procedure to eliminate my angina, I and my doctor might consider it money well-spent, while you might consider it wasteful. DrRich has arbitrarily chosen a number that falls within the range of popular estimates. But it’s a spreadsheet. If you don’t like 25%, substitute your own estimate. You will find that the rate of wasteful spending we assume for Year 1 in this spreadsheet has little effect on the outcome.

Assumption 2) The annual overall rate of growth of healthcare spending (i.e., healthcare inflation) is 10%.

Assumption 3) The annual growth rate of useful (i.e., not wasted) healthcare spending is economically well-behaved. That is, it matches the rate of overall inflation. The spreadsheet therefore assumes a 3% annual inflation rate for useful healthcare spending. (DrRich begs his readers to notice that this assumption is the one implicitly invoked whenever anyone says that all we need to do in order to control healthcare costs is to eliminate waste and inefficiency. In effect, our spreadsheet is designed to test the logic of this assumption. This assumption must be true if we are to to avoid healthcare rationing, because if useful healthcare spending were not economically well-behaved, then no matter what the rate of growth for wasted healthcare spending, we would still have disproportionate healthcare inflation – and rationing would be unavoidable.)

Assumption 4) The difference between the “well-behaved” growth of useful healthcare spending and the overall rate of healthcare inflation is accounted for by spending on waste and inefficiency. This of course, is the assumption that underlies all proposals for healthcare reform.

(Note: If you would like to play with the actual spreadsheet itself, e-mail DrRich and he’ll send it to you: DrRich at covertrationingblog dot com)

We see from this table several things. First, as expected, the amount of money we’re spending on healthcare, assuming a rate of healthcare inflation of 10%, is doubling roughly every 8-9 years, a growth rate that is ultimately unsupportable.

Second, in order to account for this unsupportable growth in healthcare spending by invoking waste and inefficiency, the proportion of healthcare spending that is caused by waste must increase to ridiculous proportions very rapidly, such that (for instance) by the 10th year we will have more than doubled (59%) the proportion of all healthcare expenditures that are wasteful; and by the 20th year, nearly 80% must be wasteful. Similarly, the proportion of the annual increases in healthcare spending that would have to be due to waste and inefficiency rapidly climbs to equally ridiculous proportions. By year 5, wasteful spending will have to account for 82% of the annual increase in healthcare expenditures, and that proportion continues to climb, eventually approaching 100%.

To DrRich, these numbers seem absurd on their face. But if you still need to be convinced, consider that in real life, runaway healthcare inflation has already been taking place for decades – so our position on such a spreadsheet would not be at year 1, but at year 20 (or higher). And no matter what value for wasteful spending we might have plugged in at year 1, by year 20 wasteful spending would have to be well above 80%, and more likely approaching 100%. In order for waste and inefficiency to account for the situation in which the American healthcare system finds itself today, therefore, one would have to believe that virtually all healthcare spending is wasteful. (And if you believe that, then what does it matter that tens of millions can’t afford healthcare?)

Now let us illustrate the same point in a slightly different way. This time, let’s assume that as recently as 2006, our healthcare system was 100% efficient. That is, only three years ago there was no waste whatsoever. Then let’s allow that the remaining three assumptions given above are still operative. The following table results:

We can see from these results that, even if only three years ago we had a completely efficient healthcare system, in order for waste to account for the excess growth in healthcare spending we’ve experienced since that time, then as much as 74% of today’s annual increase in spending has to be due to waste and inefficiency. Indeed, unless at some point within the second term of George W. Bush we actually had a completely efficient healthcare system (which seems doubtful), this spreadsheet tells us (again) either that our fervently held belief that waste and inefficiency accounts for healthcare inflation is completely wrong, or that today virtually all of our annual increase in healthcare spending must be due to waste and inefficiency, and none due to useful healthcare.

Play with the spreadsheet yourself. You will quickly see that as long as we insist that wasteful spending must account for the unsustainable growth we’re seeing in healthcare costs, then whatever our assumptions may be regarding the current proportion of wasteful healthcare spending – whether we say it’s 20% or 50% or 0% – we very quickly encounter the same mathematical absurdities.

One can only surmise from this analysis (done, DrRich reminds you, with actual Math) that our desired conclusion is wrong. A substantial proportion of our growing healthcare expenditures must necessarily be coming from real, honest-to-goodness, useful healthcare. And if we’re going to substantially curtail that growth, we’re going to have to curtail useful spending. Which means we have to ration.

But, once again, we’re Americans and Americans don’t ration. Which is why we’ve commissioned the big insurers and the government to do the rationing covertly, a task they have accepted with great gusto. DrRich is compelled to point out, once again, that waste and inefficiency is the sine qua non of covert rationing. Disguising all the rationing activity as something other than rationing fundamentally requires opaque procedures, unnecessary complexity, bizarre incentives, Byzantine regulations arbitrarily and variably enforced or ignored, and the diversion of healthcare dollars to non-healthcare ends (such as corporate profits, expanding layers of government bureaucracies, and other massive bureaucracies within the healthcare system created to defend against government bureaucracies). Covert rationing multiplies waste and inefficiency, and does so systematically. To reduce the necessary rationing to the smallest amount possible, we will have to figure out a way to do the rationing openly, and not covertly.

In the meantime, DrRich does not kid himself that exposing the mathematical absurdity of the chief assumption espoused by our political leaders, in their brave efforts to reform healthcare, will change hearts and minds. American political partisans, not to mention the American media, eat mathematical absurdities for lunch. And magical thinking amongst the populace, at least when it comes to the exuberant accumulation of household (and national) debt and the application of medical science, far from being discouraged, is actively promoted.