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How are the anti-fraud regulations being used?

Anyone, such as your author, who may be inclined to criticize the anti-fraud activities of the government as overzealous, runs into a problem right away; namely, the existence of healthcare fraud is undeniable, it is inexcusable, and vigorous efforts to eliminate it are appropriate.  The provisions of HIPAA and the FCA can easily be viewed as simply giving prosecutors the weapons they need to go after the criminals that are robbing all of us.

One way to examine whether the anti-fraud imperative is doing good or doing evil is simply to look at how these regulations are applied.  Are they being used to seek out and destroy those providers who are truly guilty of fraud in the classic sense (that is, the intentional and willful effort to procure funds illegally)?  Or are they being used as a Regulatory Speed Trap, to hound and intimidate the more typical, generally honest practitioner who is confused about the regulations but who dearly wants to avoid even the appearance of impropriety?  If our healthcare system was operating anywhere but in the LLQ, where covert rationing is king, and where controlling physician behavior is Job One, the former behavior is almost certainly the one we would see. As it is, however, we are indeed operating in the LLQ, and all too often we see the latter.

Lack of clarity, and lack of desire for clarity

If the objective of an anti-fraud campaign were truly to eliminate fraud from the system, then the enforcers would want the rules and regulations to be simple and clear enough that honest, well-intended people would know how to behave.  

Admittedly, this is easier said than done.  It is the nature of regulations to become constantly more complex over time. "Thou shalt not kill," for instance, is a pretty straightforward regulation, but civilization cannot leave it alone.  Within a few thousand years we find ourselves factoring in issues such as warfare, capital punishment, late-term (or early-term)  abortion, frozen embryos, withdrawal of life-support, physician-assisted suicide, the insanity plea, the definition of "brain-dead," and cloning.  Pretty soon deciding (in a regulatory sense) whether it's okay to kill, or whether one is even killing, becomes next to impossible.

So it is certainly unfair to indict the Wonkonians for failing to provide us with a simple code that immediately clarifies all healthcare regulations.  Insisting on the impossible is never very useful.  Health care is inherently a muddy field of endeavor, and the regulations that have evolved to govern healthcare are necessarily even murkier than, say, banking regulations.

On the other hand, especially when they're talking about punishing violators with massive financial penalties or jail, it is fair to expect the Wonkonians to clarify specific areas of regulatory confusion. They should act as if they are interested in helping the essentially honest to stay on the straight and narrow, not in entrapping them.

In this light, it is instructive to note that when Congress was deliberating on HIPAA in the mid-1990s, the only fraud-related provision that produced any significant debate whatsoever was the stipulation that the government should provide "guidance" to providers regarding the legality of certain proposed activities. Under this contentious provision, providers could seek advice prospectively from the OIG on, for instance, what constitutes prohibited remuneration, or whether a proposed partnership structure meets safe harbor provisions under the anti-kickback law.  Providers would be saying, in other words, "We don't want to break the law, we want to be solid citizens.  Here's what we propose to do.  If we do this, will we be in compliance with the law?"  

The Clinton administration, the DOJ, and the OIG vociferously opposed this seemingly reasonable proposal.  Their objections were based on the fear that issuing opinions before the fact would impinge on their ability to subsequently prosecute cases.  This argument seems to complain (revealingly) that clarifying the regulations would lead to more compliance and therefore less fraud to uncover.  In the end, the advisory opinion requirement became part of HIPAA. But even then, President Clinton himself called for rapid repeal of these provisions just a few days after signing the bill into law.  It thus seems apparent that the Wonkonians do not consider the clarification of healthcare regulations to be a worthwhile endeavor.  Instead it appears that any requirement to do so is seen as being burdensome and counterproductive to their true goal.

In any case, providers counting on these advisory opinions to keep them out of trouble are likely to be disappointed.  In actual practice, submitting a question for an advisory opinion to the OIG is time-consuming and expensive, and when the reply is finally obtained it can be less than helpful. The OIG routinely stipulates, for instance, that its opinions are binding only for the individual entities requesting the particular opinion in question, and cannot be relied upon by any other individual or entity; that its opinions are stipulated to be strictly limited to the facts described therein, and apply only as long as all of the material facts have been fully, completely and accurately presented and the arrangement in practice fully comports with the information provided; that no other party may introduce any advisory opinion into evidence in a legal proceedings; that no other federal or state agency is bound by these opinions; and that an advisory opinion cannot be applied to any other arrangements which appear similar in nature or scope. Finally, as the kicker, the OIG reserves the right to "reconsider" the questions and issues raised in its advisory opinions at any time, and modify or terminate those opinions retrospectively.

This is not exactly clarity at its best. In fact, the only thing that seems clear is that the regulators are failing to display much interest in giving providers a line of sight to regulatory compliance.

How effective is the new anti-fraud bureaucracy?

This is a very difficult question to answer, as there are no metrics by which to judge its efficacy.  There are ways to estimate the number of fraud cases brought, and the amount of money collected, by the fraud control activities. But since we really don't have any idea of the true baseline level of fraud, judging the impact on the overall amount of healthcare fraud is not possible.

Effectiveness of HIPAA anti-fraud measures

The number of civil filings and criminal indictments more than doubled (from approximately 300 cases to nearly 700 cases) in the first five years after HIPAA became law.  

Periodically and in accordance with federal regulations, the General Accounting Office (GAO) will perform an audit of the Health Care Fraud and Abuse Control Program (HCFAC). In its most recent report,  which covers fiscal years 2002 and 2003, the GAO notes that HCFAC had given themselves credit for saving the healthcare system $19.9 billion in 2002 and $20.8 billion 2003 as a result of their anti-fraud activities.  However, the GAO's audit could only account for savings of $1.5 billion (2002) and $3.9 billion (2003). Thus, HCFAC had exaggerated its own efficacy by more-or-less a factor of 10. Further, the GAO notes in its report (more than somewhat disapprovingly), that while it had previously asked both the HHS and the DOJ to formally notify Congress of the fact that HCFAC's own reports have not been entirely accurate or timely, HHS and DOJ had thus far declined to do so. (It is worth noting that if physicians had taken accounting liberties anything like those taken by the regulators themselves, they would be paying triple damages, huge fines, and negotiating plea bargains to stay out of jail.)

So, in summary, it appears that the HCFAC effort has resulted in a doubling of legal filings against providers, and in the recovery of an additional few billion dollars a year.  Is this good? Sure it is.  Is it a resounding success?  It is very hard to say, of course, but given that, officially, 10% of the $1.2 trillion we spend on healthcare is said to be wasted on fraud, recovering a couple of billion here or there does not seem all that impressive. If it were sufficiently impressive, perhaps the HCFAC folks might not have felt compelled to inflate tenfold the savings they actually generate.

Effectiveness of the False Claims Act

It is even more difficult to estimate the amount of "savings" to the healthcare system that the FCA has produced. Since many FCA actions take the form of lawsuits brought by private citizens and are litigated by private law firms, a lot of the "winnings" are not returned to the healthcare system. The FCA industry, however, has seen robust growth.  While in 1991 only $70 million was recovered in qui tam lawsuits, by 2001 $1.6 billion was recovered; the majority of this recovery came from suits related to healthcare fraud.

The FCA appears to have become the government's vehicle of choice for prosecuting healthcare fraud cases, either by initiating actions themselves, or joining qui tam suits brought by individuals. The most notorious and possibly most illustrative of FCA actions brought by the feds is the Physicians at Teaching Hospitals (PATH) audit.  The methods the feds are willing to use and the "attitude" they display as they pursue fraud claims are nicely illustrated by this example.