Under the Magnifying Glass

February 27th, 2009 by Nick Jacobs Leave a reply »

Hospitals and health professionals rate as some of the most highly scrutinized organizations and businesses in the United States. Hospitals and physician’s offices, durable medical equipment companies, and home health agencies are under the magnifying glass of federal, state, and local government inspectors.

Some would say that this is with good reason as we scrutinize the numbers behind the analysis. As annual health care costs continue to ascend toward a projected $2.4 trillion (16.6% of the GDP*) and with health coverage a major political issue this year, the potential of a $72 – $240 billion annual loss (3% – 10%** of the total health care outlay) to health care fraud and abuse and mistakes, remains a major issue for private citizens, corporations and government agencies.

In order to put this in perspective, the overall numbers at play relative to the $2.4 trillion healthcare budget are significant. The monies estimated to be consumed inappropriately reach a staggering $236 – $787 loss per capita, or enough money to insure up to 30.5 million Americans, or 65% of today’s total uninsured population of 47 million.

The pendulum swings both ways in this scenario, however, as these issues occur on both sides of the provider and healthcare user coin. The Centers for Medicare and Medicaid began RAC audits utilizing Medicare Recovery Audit Contractors (RACs) to recoup $980M from Providers in demonstration projects in California, Florida and New York. To say that this system is fair, equitable, and was well conceived would be an exaggeration because the auditors employed to do these audits are paid a percentage of their findings, and that inherent conflict alone stresses the validity of this arrangement on many levels.

A few specialty healthcare finance based organizations like my new employer, SunStone Consulting, concentrate in preparing hospitals for these inevitable visits by the RAC auditors. When these specialty companies do their work appropriately there is no reason for the RAC auditors to destructively move through the billing and medical records departments of each hospital.

The very essence of the problem is that, no matter what the intent, any time federal dollars are involved, these investigating authorities appear to have already made a determination that the problem or mistake was a purposefully fraudulent act whereas, in fact, it is quite possible that it was an oversight, an honest mistake, or an inappropriate key stroke.  To determine the validity of these situations in which fraud, abuse, and overpayment are suggested, research through organizations such as HealthCare Insight specialize in identifying, preventing, and investigating both provider and patient fraud health care claims.

Companies like this typically provide private and public sector health care claims payors (Health Plans, MCOs, Insurance carriers, TPAs, Medicaid, Medicare, etc.) with a comprehensive suite of clinically validated fraud and abuse surveillance solutions designed to maximize claims administration accuracy and minimize payment waste.

Interestingly, with the bailout bills from both the Bush and the Obama administrations being activated on an ongoing basis, one must stop and ask how much each one of those nearly trillion dollar initiatives will cost to audit, investigate, and qualify. It’s obvious that the hands off theories did not work, and now we will see the pendulum swing back as far as it will to attempt to  over correct the sins of the past.



  1. Mike says:

    I have to agree with you Nick. I wish we could trust those in positions of power, but history has shown over and over again that there are a number of us in health care and elsewhere that can not be trusted to do the right thing. Greed seems be much more of a powerful motivator than righteousness.

    The other thought I have regularly these days is why we as a people made everything so difficult to accomplish. Someone is sick or injured. They get the medical care they need, and the bill is paid. Simple enough. I really think we have placed too many hurdles in the path of patients that are designed to thwart those that engage in less than savory acts.

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