Volume 52, No. 12 December
1996
AAPS and some of its members and state chapters are seeking alternatives to high-cost insurance, utilizing a combination of high-deductible insurance and a Medical Savings Account (MSA). (The enclosed survey regarding the formation of a credit union is part of this effort-please fill it out and return it.) Thousands of businesses have successfully used variants of this strategy, despite the tax penalty imposed by the federal government on the direct payment of medical expenses. Patients Choice, Inc., a company founded by a group of Idaho physicians, is now offering a product to local businesses.
Theoretically, MSAs should be a roaring success. Practically, impediments include the heavy involvement of most insurance companies in managed care-a product that is less risky (for the company, which transfers the risk to physicians and patients) and more profitable. The higher the gross revenues, the greater the profits, for example from the ``float,'' which is invested at interest.
Only heavy consumer demand is likely to induce companies to offer high-deductible insurance at an attractive price. But the entitlement mentality, inculcated by decades of third-party payments, has suppressed such demand. Moreover, insurance premiums have soaked up a large share of the money that could otherwise reside in private savings.
A state such as New Jersey, where insurance prices are prohibitive, would seem like the least likely place for MSAs to thrive. But AAPS Past President Lois Copeland, M.D., reports that Ramapo College in New Jersey is trying an MSA product.
With MSAs, patients can avoid third-party involvement in most of their medical expenditures. A further step is being taken by Family Health Foundation of Piscataway, NJ, which is determined to escape altogether from the ``coercion and restrictions of insurance and government oversight.'' Alieta Eck, M.D., informs me that her family intends to pay its last ``health insurance'' premium in December, 1996.
This idea is not unprecedented. For example, the Amish have long held that insurance is immoral; they place their trust in God. They experience their share of disasters, and when misfortune strikes, they bear one another's burdens. They do have access to modern medicine. An Amish boy had both arms reimplanted after a farm accident, and the bills will be paid from the proceeds of community suppers.
Other church groups, notably the Mormons, also have well- organized programs to aid the needy, whether the crisis is sickness or some other emergency. A common feature of such programs-as opposed to government ``welfare''-is to get the beneficiary back on his feet, rather than keeping him dependent. It takes a community, not a collectivist village, to instill self reliance.
Unlike the Amish or the Mormon programs, Family Health Foundation is nonsectarian, although its nucleus is made up of believers who hope that local churches will become involved. Under its plan, members will make voluntary monthly (taxable) contributions to their own individual MSAs, plus a somewhat larger (tax-deductible) contribution to the charity. When serious illness strikes, the charity can disburse funds by means of contributions to the MSAs, and individuals will continue to pay their own medical bills directly. A proportion of the Foundation's funds will aid the indigent.
If too much illness strikes before the reserves are built up, ``we'll have to have bake sales,'' Dr. Eck stated.
Participation in such a program involves a leap of faith. But the alternatives, Dr. Eck points out, also involve faith-in government or impersonal corporations. And you know that the portion of your premium that is not spent on care becomes profit to the company, not savings for your future needs.
Denial of care for profit by third parties is now routine. For all the promises of managed care to keep you healthy, ``managed care requires that patients take an active role in their own health maintenance and only use the system when it is absolutely necessary'' (Dr. Winnie King, health care editor of KCBS TV, Los Angeles). Worse, such denial is being turned into an inverted ethical imperative.
``We have to start thinking about the health of the population rather than the health of individuals,'' stated Charles Peck, M.D., of Aetna Health Plan, in a videotaped lecture to medical students at University Hospitals of Cleveland. FHP Foundation, a large for-profit HMO, heavily funds ``ethics'' groups that focus primarily on facilitating and hastening death. Foundations formed to spend the proceeds of nonprofit hospital takeovers are abandoning their mission of providing medical care to the indigent, instead buying things like a 54-by- 30 foot smoke-belching model of the Space Shuttle to be used by fifth graders.
Medicare writes threat letters to providers of charitable service: ``We recently notified you of information we received regarding your refusal to submit a claim for services provided to ... in the amount of $0.00.'' St. Elizabeth of Hungary Clinic in Tucson for the first time is short of volunteer physicians because HMOs object to physicians spending time away from contracted patients. Experiments in minimizing or eliminating third-party involvement may offer the only chance to preserve the ethics of Hippocrates-and the only chance at life itself for many patients, including both the insured and the indigent.
``There is scarcely anything more important in the
government of men than the exact-I will even say the pedantic
-observance of the regular forms by which the guilt or innocence
of accused persons is determined.
Winston Churchill, My African Journey
When one hospital indicated an interest in challenging the use of the False Claims Act for misbilled lab tests, assistant US attorney James L. Bickett said ``it would be death to them if they do'' (BNA's Medicare Report 7/19/96). A case captioned Ohio Hospital Association v. Shalala (DC NOhio, No. 1:96-CV-2165), filed Oct. 7, 1996, seeks injunctive relief to stop HHS from retroactively applying billing policies that were not properly established or communicated. The broader goal is to stop the government from using the False Claims Act for what used to be considered billing errors. This Act allows for triple damages and fines of a minimum of $5,000 per $10,000 per false claim. It also permits the government to go back six years (to 1989), penalizing practices that were immediately corrected when the carrier first called attention to the error in 1994.
Use of the False Claims Act is ``extreme and uncalled for,'' stated OHA attorney Mary Yost (BNA HCPR 10/14/96). The Act, unlike federal fraud statutes, does not require authorities to prove that providers acted intentionally but only that they filed incorrect documents (AM News 6/24/96). Even harsher fines of up to $10,000 per item have now been applied to claims filed with any insurer, public or private, by the Kassebaum-Kennedy bill, for incorrect codes, ``for a pattern of medical or other items or services that a person knows or should know are not medically necessary,'' or for each instance of failure to comply with statutory obligations.
Convicted of defrauding the government of $65,140.02 in Medicare payments for unnecessary cataract surgery on 15 patients, Dr. Rutgard was sentenced to more than 11 years in prison and ordered to pay $16.2 million in restitution. Dr. Rutgard's appeal of that judgment focuses on a methodical challenge to the sufficiency of the evidence used to convict him. Surrounding that central question, however, stand three issues of equal importance to the members of AAPS and to all physicians who participate in the Medicare program.
First, Dr. Rutgard was convicted of 14 counts of false statements for notes he made in his own patient files-even though he never submitted those files to anyone at all. (The government seized them.) No reported case has ever approved a conviction for false statements when those statements were made for one's own records and were not submitted to any third party. To allow those convictions to stand is to allow the government to rummage through a doctor's private files, unearth a falsehood, and garner a conviction.
Second, Dr. Rutgard's sentence was dramatically increased by the government's exaggerated loss. Dr. Rutgard would have been sentenced to about 3 years if the government's loss were the actual $65,140.02 proved at trial rather than the alleged loss based on every claim for payment submitted by Dr. Rutgard over the 5 years preceding the indictment-for 20,000 patients.
Third, Congress intended that proceedings against physicians for Medicare fraud be conducted pursuant to the Medicare fraud provisions, 42 U.S.C. 13201-7, et seq., and not pursuant to the general anti-fraud statutes employed against Dr. Rutgard. Even if the Court does permit the government to use the draconian remedies of the False Claims Act, 18 U.S.C. 287 against individual doctors, this Court should scrupulously assure that punishment is not excessive.
The focus on the three forms of government overreaching should not obscure AAPS's deep concern with the insufficiency of evidence to support the mail fraud and false claims convictions. Three medical experts testified that surgery on the 15 patients named in the indictment was medically necessary; the government's experts testified that it was not. A dispute among medical experts over the necessity of a procedure should not result in criminal penalties for the losing side.
The government's own billing expert testified that Medicare's reimbursement procedures are ambiguous. Dr. Rutgard followed expert advice on how to comply with those procedures. Where both the medical terms and reimbursement procedures are ambiguous, ``the government must prove beyond a reasonable doubt that there is no reasonable interpretation ... that would make the defendant's statements factually correct.'' Ambiguities in penal provisions, by the rule of lenity, must be resolved in favor of the defendant.
As this Court has said, ``Section 1001 prohibits the making of material false representations to a government agency regarding a matter within the agency's jurisdiction.'' Courts have broadly construed this requirement to apply to statements made to the agency indirectly, as through someone with an obligation to pass the statement on to the agency or someone likely to do so. But no case holds that a statement made to oneself constitutes a false representation to a government agency.
The length of Dr. Rutgard's sentence was increased by extrapolating from 15 patients to the other 19,985. To be meaningful at all, the government's extrapolation theory required ``random test samples'' of 20,000 patients and proof that the extrapolation was ``determined in a manner consistent with the accepted standards of reasonable reliability.'' The government's procedure fails both parts of the theory introduced by the prosecutors themselves. The government selected precisely those cases which were most incriminating and hence least repre- sentative. Other federal and state courts have rejected similar attempts to draw general inferences from such biased samples. The Presentencing Report recognized the obvious lack of proof for the government's extrapolation theory, noting that the ``probation officer is unaware of what the jury determined, if anything, as to the percentage of the defendant's billings that were fraudulent.'' Inexplicably, in the face of this factual void, the probation officer and the district court determined that 100% of the Medicare billings were fraudulent-even though more than 1,500 of Dr. Rutgard's patients submitted letters ``expressing strong support for him.'' This sort of shoddy, unreliable statistics cannot fairly be used to send a man to prison for eight additional years.
Congress has created a comprehensive set of administrative, civil, and criminal remedies specifically for Medicare fraud. The Supreme Court has held that courts should give ``precedence to the terms of the more specific statute where a general statute and a specific statute speak to the same concern.'' This principle has a ``special cogency where a court is called upon to determine the extent of the punishment to which a criminal defendant is subject.'' Permitting the government to choose an enhanced punishment ``would violate the established rule of construction that `ambiguity concerning the ambit of criminal statutes should be resolved in favor of lenity'.''
Even if the Court permits the government to forgo the Medicare fraud provisions, the application of the False Claims Act to a medical practice caused the U.S. Supreme Court to recognize a constitutional prohibition against multiple punishments, and lower courts have applied the Excessive Fines Clause in the same context.
With orders of civil forfeiture and restitution totalling $16.2 million-for a $65,104.02 fraud-the government has secured punitive fines that are 249 times the fraud proved at trial. In Halper, the application of the Act to a ``prolific but small-gauge offender'' produced fines that were punitive because they bore ``no rational relation to the goal of compensating the government for its loss.'' The court concluded that such fines constituted a forbidden multiple punishment-and these fines were only eight times the amount of claimed damages.
Likewise, in U.S. v. Advance Tool Co., the court found that a government contractor that had falsely invoiced the government 686 times could not be found liable for $3,430,000 ($5,000 per false invoice) but would instead be fined $365,000 ($5,000 for each of the substandard tools sold to the government). The court noted additional mitigating factors which are strikingly parallel to the current case, including ``the plaintiff's inability to prove actual damages at trial, the government's poor investigative procedures, and its confusing regulatory and contractual purchasing arrangements, which virtually encourage the type of conduct at issue here.'' [Copies of the brief available upon request.]
Note that I have proven that Medicare's charges against me for allegedly violating the limiting charge have been false in every instance. Nonetheless, HCFA writes to my patients and makes these false accusations to damage my relationship with my patients (Donna Shalala wants to ``deputize the seniors in this country to help us get the fraud out of the system''). Participating physicians are not subjected to this abuse. Now, HCFA wants to do the same thing with PRO complaints whether the complaints have any merit or not.
Guilt or innocence plays no role any more in HCFA's ``system
of justice.'' It is a whip at HCFA's disposal to keep physicians
from speaking out against or opposing the authority of their
bureaucracy in any way.
Lawrence R. Huntoon, M.D., Jamestown, NY
Counting to 130. I would like to supply a little more information about my son Jeffrey's indictment and trial. During the trial, the prosecution reduced the number of counts to 130, naming a total of 17 patients. For a single patient, they named each of several different surgeries, the facility fee for each surgery, etc. There were two counts of mail fraud for sending a pre-authorization letter to nongovernment insurance carriers for patients in whom surgery was never done. One was probably a government plant, who came in requesting eyelid surgery and was informed of an early cataract.
Present in the courtroom throughout the entire trial were 5 federal agents, 3 assistant U.S. attorneys, several paralegals, and computer operators. The government computerized the courtroom and bar-coded each of the thousands of exhibits so they could be viewed on 10 TV monitors. The government spent millions of dollars on this case.
The judge frequently napped during the case, shook the hand of one prosecution witness, and patted another on the shoulder. I began to tally the objections: 90% of the prosecutions's objections were sustained, and 90% of the defense objections were overruled. The jurors were selected by the judge in one hour; none of the defense's questions were used.
At the hearing before the appeals court, additional briefing
was ordered. The judges asked for an account of the amount paid
for each of the patients named. (For some, no money was ever
collected.) The jury was apparently led to believe that my
son was paid $49,000 for a single patient, when in fact that
check came with a single EOMB that listed 60 or 70 patients and
numerous procedures.
Mrs. Lorraine Rutgard, La Jolla, CA
Coding Alert. The CPT book has the AMA as publisher, but
the ICD book has several publishers. When you choose your
favorite ICD, be sure to have at least one more reference. ICD
books have mistakes, and they also have disclaimers in front.
Their mistake becomes yours. For example, you could code one
diagnosis when you need two. Physicians and coders are
responsible for what they code.
C. Kit Burgess, CPC
Subsidizing Medicare. With the ``should know'' standard
for civil monetary penalties, physicians, especially those in
private practice, will be impoverished one way or another by
modern Robin Hood politicians who want to deliver services to
their constituents without money to pay for them.
Edgardo Perez-DeLeon, Detroit, MI
A Semantic Note. I notice that you frequently refer to
managed care as ``rationing.'' Of course, we all know that's what
it is, and I have recently adopted the practice of never using
the term ``managed care'' in writing. Instead, I expose it for
the ``nuspeak'' deception that it is by writing it only as
``managed (cost through rationed) care.'' Perhaps you would
consider doing the same.
George F. Wittkopp, M.D., Beaverton, OR
Sacrificing Freedom. We are living in a time of opulence,
a time of excess. We have lost our sense of hunger for good
common sense and justice. We are tying ourselves, our freedom,
in knots with stupid and foolish laws and regulations...We are
sacrificing freedom on the altar of the times; on the auction
block of money, so-called ``success.'' For money that has no real
value when all is said and done. It is better to have one friend
than a million dollars. For money, somebody might shoot you-a
friend would share his supper with you.
Andrew Mance, M.D., Oakland, MD