STATEMENT
of the ASSOCIATION OF AMERICAN PHYSICIANS & SURGEONS
(AAPS)

to the

Small Business Committee of the
U.S. House of Representatives
Winchester Hall -- 1st floor Hearing Room
12 East Church Street
Frederick, Maryland

RE: HOW DOES THE FEDERAL GOVERNMENT HELP OR HURT?

Written Testimony Submitted by
Andrew Schlafly, Esq., AAPS General Counsel
July 14, 2003, 2 p.m.

Mr. Vice Chairman Congressman Roscoe G. Bartlett and Members of the Subcommittee: My name is Andrew Schlafly, Esq. I serve as General Counsel to the Association of American Physicians & Surgeons ("AAPS"). I am submitting this testimony as an addendum to the live testimony by James Pendleton, M.D., who serves on our Board of Directors. We thank Mr. Vice Chairman and this Committee for inviting us to submit testimony at your important hearing today.

AAPS is a nationwide organization of physicians devoted to defending the sanctity of the patient-physician relationship. AAPS revenue is derived almost exclusively from membership dues. We receive no government funding, foundation grants, or revenue from the sales of compliance materials. I do not have any known conflict of interest.

My testimony addresses four issues paramount to freedom in medicine today:

(1) overzealous "fraud and abuse" and "drug abuse" prosecutions of honest physicians;

(2) overzealous malpractice claims and the resultant high cost of insurance premiums;

(3) unnecessarily complex and expensive medical billing terminology; and

(4) insurance company demands on small practitioners to bill electronically.

Let me address each of these, with special attention to the first point:

We have seen, and helped, many individual physicians victimized by overzealous "fraud and abuse" prosecutions. In 1996, Dr. Jeffrey Rutgard received a prison sentence of 11 1/4 years and an order to pay over $16 million based on an alleged Medicare billing fraud ultimately amounting to only $46,000. At no time did anyone doubt his superb skills as a surgeon. But his peers disliked his competitive presence, and a juror voted for conviction because, as he later admitted, he did not want the government to incur the expense of retrying him. On appeal, our amicus curiae brief helped persuade the Ninth Circuit to reverse the sentence and vacate many of his counts of conviction. United States v. Dr. Rutgard, 116 F.3d 1270 (9th Cir. 1997). Since his release, he has performed many hundreds of operations to save the eyesight of the poor - in other countries, because the prosecution cost him his license in California. Why must patients forgo the services of good doctors based on purely financial billing disputes?

Tragically, we are aware of many cases like Dr. Rutgard's. A dentist arrested on charges of Medicaid billing violations has sat in jail for nearly six years without even a trial. We filed amicus curiae briefs on Dr. Sell's behalf both before the Court of Appeals for the Eighth Circuit and the Supreme Court. A few weeks ago, the Supreme Court held for Dr. Sell in reversing an order to forcibly medicate him. United States v. Dr. Sell, 123 S. Ct. 2174 (June 16, 2003). The government insists on drugging Dr. Sell to render him competent for trial, and continues to incarcerate him in the meantime. This overzealous prosecution began from a mere billing dispute in the Medicaid program.

At the root of the problem is a regulatory system under Medicare and Medicaid best described by former Chief Justice Warren Burger to be "a morass of bureaucratic complexity." Herweg v. Ray, 455 U.S. 265, 279 (1982) (Burger, J., dissenting). This system imposes administrative burdens on the practice of medicine that are staggering and continue to increase without bound. Large organizations can handle the complexity, but it is suffocating the small practitioner. It has become impossible for a country doctor to treat patients and comply with the massive regulatory burdens at the same time. On top of that, some prosecutors are exploiting the regulatory complexity by prosecuting small practitioners.

In Springfield, Illinois, for example, psychiatrist Dr. Robert Mitrione was sentenced to 23 months in jail based on a conviction of only $75.25 in disputed Medicaid charges. United States v. Dr. Mitrione and Devore, Crim. No. 00-30021 (JES) (appeal pending). His conviction remains even though the trial judge found that the testimony of the key government witness "was false to a dramatic degree." Aug. 23, 2002, Transcript Vol. 21, at 7.

We wish these were isolated examples. They are not. In the same district, Medicaid orthodontist Dr. Sergius Rinaldi was jailed for months before trial and then induced to plead guilty to a billing practice that was subsequently discovered to be legal. But now the court will not let him undo his plea bargain. United States v. Dr. Rinaldi, 2003 U.S. Dist. LEXIS 2763, *7 (C.D. Ill. Feb. 27, 2003).

A large medical organization can hire the attorneys and compliance consultants to protect themselves against this game of regulatory "gotcha". Small practitioners cannot. They have no safeguard against an adversary determined to find a regulatory violation somewhere. The law gives them no right to explain their billings prior to an indictment, and their offices are raided and shut down without the investigator ever hearing the doctor's side of the story. Reputations built over a lifetime are snuffed out in a few hours, even if the doctor ultimately prevails in court.

States, facing insolvency, are all too eager to eliminate doctors who are billing under the Medicaid program. Rather than litigate over the states' obligations to reimburse for care to the poor, it can be easier simply to label the doctor a crook, indict him and remove his expense from the system. Communities, as in the cases of Drs. Rinaldi and Mitrione, are left without an adequate substitute. The indigent patients go without care, and the state saves money it should be spending on that care. For example, while Dr. Rinaldi was imprisoned before trial, his young patients were left with braces on their teeth and no one else to care for them.

Now prosecutors are targeting physicians who prescribe pain management. This can be triggered by an insurance company seeking to avoid expensive prescription costs, or by a press report of an overdose by someone in the community. Either way, there is rarely an independent evaluation of the physician's practice prior to indictment. Small practitioners have no way of preventing an overdose by one out of many hundreds of patients. Physicians are not custodians or supervisors of their patients, and prosecuting honest doctors as drug dealers is not the answer. Yet we now see prosecutions of small practitioners in nearly every region of the country, facing the threat of very long prison sentences in order to coerce them to plead guilty.

For example, pain management specialist Dr. Jeri Hassman in Tucson, Arizona, faces trial later this month as an alleged drug dealer even though her colleagues vouch for her care and the government's case is based on patients who were in tremendous pain. One patient at issue in the case even threatened to kill herself because she was in so much pain. Such prosecutions are driving small practitioners out of pain management, and woe to patients who will need pain relief and cannot find anyone to provide it. In South Carolina, Dr. Deborah Bordeaux faces a mandatory minimum sentence of 20 years under a "drug kingpin" statute, even though she had worked only two months in a temporary position for treating chronic pain and other ailments.

Large health care operations like HCA have the luxury of coders, handlers, and documentation specialists to address the "morass of bureaucratic complexity" in our regulatory state. Small practitioners do not have that luxury, and their defenselessness should not be exploited to charge honest doctors with fraud, abuse or drug dealing. It is senseless to require the same documentation by a doctor doing house calls and visiting remote custodial care facilities as someone who requires patients to visit him in a fully staffed office. We want our doctors to focus on patient care, not become glorified paper-shufflers. Small practices should have sensible exemptions from many of the documentation requirements applicable to large-volume facilities.

When physicians greet a patient, they do not assume the patient is bankrupt, suicidal, promiscuous, illegitimate or insane. So why does our own government presume doctors to be committing fraud when there are billing disputes in a tiny fraction of their practices? Nor does it make sense to presume a doctor to be a drug dealer if one out of a thousand patients overdoses. When the overwhelming majority of a physician's practice withstands scrutiny, then he is entitled to a real presumption of innocence.

Abusive prosecutions of small practitioners all rely on the same fiction: misusing a statistically insignificant portion of a medical practice and ignoring the rest. Federal law should require that prosecutions be based only on a statistically meaningful sample of a physician's practice. Large medical organizations have the resources to defend against statistical distortions; small practitioners need protection in the law itself against such abuse.

The current malpractice crisis arises from a similar problem: not statistical distortions, but misrepresentations about medical conditions and treatments. Non-economic damages, such as pain and suffering, are way out of hand now. Caps are essential to any meaningful reform. The limits have worked well in some states but need to be extended to all 50 states. Congress could achieve this, which would overcome obstacles to tort reform in certain state constitutions like Pennsylvania's. The malpractice crisis is typically a state issue, but the situation is so desperate that we welcome any possible federal relief. Many small practitioners are forced to close their offices and retire early because of astronomical insurance premiums. Patients are the ultimate victims.

Regulatory obligations also disproportionately burden small practitioners in other ways. The Current Procedural Terminology (CPT), the basis for most billings, is not even available over the internet. Doctors must buy it, and then pay significant charges for updates, seminars, consultants and software. Why must anyone pay simply to learn what the law is? For a small practitioner who cannot share the substantial CPT costs with colleagues, the burden is significant. But it is more than a financial burden - it is also a loss in time and increased uncertainty about what the law really is. Carriers complain about doctors not complying with billing requirements, yet do not post those requirements on the internet because the American Medical Association (AMA) wants to sell them for tens of millions of dollars in revenue. It is no wonder there is so much administrative cost and confusion in our medical system when the basic requirements are inaccessible.

This Committee could immediately increase Medicare compliance by mandating that all requirements be posted on the internet. HHS adopts the CPT standard by contract with the AMA, and this Committee should require HHS to promulgate only standards that are made available to the public over the internet. Public access would then create pressure to simply the system and save administrative costs, rather than allow the AMA to enhance profits by selling endless revisions.

Finally, it is worth addressing the threat posed by insurance companies to small practitioners. Some insurance companies are now demanding that physicians file only electronic claims. This is contrary to the statutory requirement that Medicare allow offices with fewer than ten (10) fulltime equivalent employees to continue to file paper claims. 42 USC § 1395y(h) mandates that:

The regulatory costs imposed by prosecutions, malpractice claims, CPT revisions, and forced electronic billing are unbearable for many small practitioners today. Large medical groups can manage and prorate these costs more easily than a country doctor can. Driving the solo and small group practices out of business is bad for patients, and hurtful to our nation. The American people like small medical practitioners, and want them to be able to focus on medicine rather than paperwork.

We respectfully request this Committee to accept our comments and suggestions, and take appropriate action. We welcome any follow-up requests for additional information. Thank you very much for considering this testimony along with that of our director, James Pendleton, M.D.