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Fraud, Abuse, and the Medicare Industrial Complex:
A Practicing Physician's View

by Lawrence R. Huntoon, M.D., Ph.D.

President Assoc. of American Physicians and Surgeons

Presented at the

Heritage Foundation
March 1, 2000

Ladies and gentlemen, you know we're in big trouble in medicine today in this country when there's a code not only for flatulence, but one for the guy standing downwind as well. I'm not making this up. If you look in the ICD-9 diagnosis coding book that Medicare requires physicians to use, you'll find a code for almost everything that can happen to a person. There's a code for injury due to legal intervention by gas (particularly appropriate if you happen to live in Waco, Texas), a code for injury that occurs while riding an animal that collides with another animal, a code for injury from being pecked by a bird, a code for injury from prolonged weightlessness, and a code for injury due to a fall from a spacecraft, flagpole, or commode. There's even a code for a person who has been sucked into a jet engine. Now think about that. Why would you need a code for a person who has been sucked into a jet engine?

Yes, there is a code for almost everything.... everything except for the plague that is so well entrenched in our great nation today - Government Dependency Illness. There is no code for that. Indeed, the sad fact is that many people today don't want to be cured of this disease. Many have willingly traded their freedom and liberty for government-provided security, however false and precarious that may be.

But I'm not here today to talk about Government Dependency Illness and the loss of freedom and liberty that accompanies socialized medicine. I am here to talk about a serious crisis that affects both patients and physicians. Unlike the fictitious "crises" of the socialists, we have a real crisis today in this country and it's the HCFA/Medicare bureaucracy itself. This abusive and tyrannical HCFA bureaucracy has created a Frankenstein monster with an insatiable appetite for physician time and one which obstructs, impedes, and interferes with every aspect of the practice of medicine today. If you have any doubt about this, consider the fact that there are only about 17,000 pages of IRS regulations, whereas there are more than 111,000 pages of Medicare regulations.

As a solo physician in the practice of private medicine, I now spend well over 50% of my time doing nothing but fighting this HCFA/Medicare bureaucracy. In fact, in our office we have Frankenstein's son, "Little Frank," which stands 6' 10" tall and weighs 168 pounds. "Little Frank" consists of approximately 20,000 pages of correspondence that I have had with the HCFA/Medicare bureaucracy regarding problems created by the bureaucracy. It scares me sometimes to think that I actually have more pages of correspondence with this HCFA/Medicare bureaucracy than there are IRS regulations, and this mass of correspondence keeps growing every week, as do the costs associated with maintaining it. "Little Frank" eats a lot of my time, money, and energy. The contradictory, illogical, and incomprehensible nature of Medicare's regulations is truly mind-boggling.

The Health Care Financing Administration has transformed itself since 1965 into an ugly, uncontrollable beast that should be called the Health Care Controlling Administration. Consider how far it has strayed from the original intent as stated in Section 1801 of the Act that created Medicare - the Act that forbids any federal interference in the practice of medicine, specifically forbidding "any federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided, or over the selection, tenure, or compensation of any officer or employee of any institution, agency, or person providing health services."

So, what effect does all of this burdensome bureaucracy have where the rubber meets the road ... patient care? Well, the effect of the HCFA/Medicare industrial complex forcing physicians to be "bureaucratically correct" (BC) has tremendous and widespread deleterious effects on patient care. Most of these effects, however, remain well-hidden from the American public. Price controls and excessive regulation predictably lead to increased costs, decreased access, and the rationing of medical care. The HCFA bureaucracy has excelled in implementing devious schemes that generally place physicians in the unwanted role of being the ones who are essentially forced to carry out this rationing scheme.

There is rationing by inconvenience, rationing by transferred costs, and rationing by bureaucratic schemes designed to fraudulently deny payment to physicians for services rendered. Some people still don't seem to get the simple concept that what isn't paid for, you can't get. For example, if you are a stroke victim and a so-called "beneficiary" of the Medicare program, you can forget about getting good physical therapy, speech therapy, and occupational therapy in an inpatient rehabilitation facility. The Government, you see, has determined that such patients "aren't worth it." If you are going to a nursing home following discharge from the hospital, HCFA considers you to be a second- or third-class citizen who will just have to make the best of whatever third-rate physical therapy the nursing home provides. What's worse is that you can't even pay for inpatient rehab out of your own pocket if you wanted to because the HCFA bureaucracy has determined that private contracting on a case-by-case basis is illegal.

This HCFA/Medicare bureaucracy has a long history of forbidding patients over the age of 65 to spend their own money on their own medical care as they choose. Most elderly patients are unaware that they have lost this freedom; they express great shock and disbelief when I tell them that this is the way their "beneficent" Medicare bureaucracy really operates.

The huge number of ever-changing Medicare regulations, including many that are either secret or well- concealed from practicing physicians, also clearly distracts physicians from patient care. When physicians must focus nearly all of their energy, efforts, and attention on making sure that they are bureaucratically correct and comply with every little bullet point in some idiotic quantitative guideline that HCFA has promulgated, it's dangerously easy to get distracted from the reason why you are providing the service to the patient in the first place. HCFA, in effect, has placed so many bureaucratic trees in front of practicing physicians that many physicians may truly no longer see the forest. This is an extremely serious problem, one which inevitably leads to a dangerous deterioration in the quality of medical care.

Medicare has also totally perverted the medical record to the point that it really is no longer a clinically useful medical record - it's a billing record. It has to be a billing record, you see, otherwise the physician will not be paid for his or her services. The bureaucracy also forces physicians to think only in terms of black and white when making a medical diagnosis. The fact of the matter is, however, that medicine has many shades of gray. We don't always know what the diagnosis is after the first encounter with the patient. Because Medicare does not recognize "rule out" diagnoses, however, and requires physicians to code everything down to the fifth significant digit, it often forces physicians to enter erroneous diagnosis codes because the diagnosis isn't yet known and the available codes for symptoms don't fit the patient's situation. The Medicare bureaucracy thus promotes medical inaccuracy by encouraging the coding of erroneous diagnoses.

Medicare has also bastardized the CPT (Current Procedural Terminology) system physicians are required to use to code for the services that are provided to patients. HCFA made a little-known agreement with the AMA back in 1983 to use the AMA's coding system, which contains separate codes for separate services. Now, however, under HCFA's so-called "correct" coding initiative (CCI), Medicare is combining separate and distinct services into a single code for payment purposes, thus cheating the physician out of proper payment for actual services provided. HCFA calls this "bundling." Physicians call it fraud.

One must ask - what is the purpose of developing a coding system with separate codes for separate services when HCFA simply ignores it? And, what happens to these bundled services for which payment is forbidden? It's very simple. Patients don't get them. It results in rationed care and poor quality care. Price controls via limiting-charge laws and HCFA's fraudulent Resource-Based Relative Value Scale also result in rationed care and poor quality care for senior citizens. All of this, of course, remains well hidden from the people that it affects because patients in general are not knowledgeable enough about medicine to know what they should have gotten but didn't get because of the bureaucracy.

Last but not least, I want to address the current fraud-and-abuse situation. What I intend to show is that HCFA operates no differently than the mob or the KGB. The former Soviet KGB had a slogan that HCFA seems to have fully embraced, and that is: "Show me the man, and I'll show you his crime." That is where physicians are today with this HCFA/Medicare bureaucracy. The rules are so numerous and complex that any physician in this country could be singled out at any time and found to be in violation of some Medicare rule, regulation, or guideline. In fact, we have learned that some government agents have even hidden behind a one-way mirror at a public meeting to see which doctors are making negative comments about the HCFA/Medicare bureaucracy. The practice of one such physician was targeted (coincidentally?) for a "Hit" - a "Hit" being defined as a bureaucratic action that kills the practice.

Lest we forget, we must remind ourselves that this is the United States of America, not Communist China. Yet we are also aware of armed government raids conducted in hospitals and private physician offices for the purpose of conducting "Medicare audits." In February of last year, 37 armed flak-jacketed agents carried out a Medicare raid in a 72-bed hospital in Eastern Tennessee. Can you imagine being a patient in that little hospital and seeing this invading army stomping into the hospital, trampling through sterile areas, forcing employees into a small room and holding them hostage? Or how about the doctor's office in West Virginia where three armed federal agents invaded and held everyone at gunpoint, including the physician, his wife, patients, and children?

Most people have no idea that this is the way that the government is treating physicians today in this country. The practice of medicine has been criminalized by our own government. Moreover, if you are a physician, you can count on the HCFA/Medicare bureaucracy treating you as guilty until proven innocent. What a totally unAmerican concept of justice! I submit to you that even accused murderers and rapists are treated better than physicians in that at least if you are accused of murder or rape, you are entitled to the presumption of innocence until proven guilty. But HCFA goes even farther into the realm of pure abuse and uses this guilty-until-proven-innocent mode of operation to extract money from physicians, hospitals and medical schools. Because of the presumption of guilt and the six-figure cost of defending oneself from charges of healthcare fraud, HCFA frequently offers to settle for double damages in return for not pursuing treble damages and prison time for the physician. What a deal! When the mob does this, it's called extortion or protection money. When HCFA does it, it's called Operation Restore Trust or some other similar euphemistic name.

Needless to say, HCFA has had much success with this tactic of legalized extortion, sometimes even applying regulations retroactively to shake down their physician victims. And, all of this, of course, is done on a bounty system whereby the recovering agency gets to keep a share of the extorted loot.

What effect does all of this have on Medicare patients' access to medical care? Well, here are some statistics from a recent survey conducted by the Association of American Physicians and Surgeons (AAPS): "82% of practicing physicians report increased fear of prosecution or investigation in the past 3 years; 71% report making changes in their practice to avoid threat of prosecution, including greatly restricting services to Medicare patients; and 34% already restrict services to Medicare patients, such as surgery. Of those who do restrict care to Medicare patients, 26% say that it is specifically because of hassles and/or threats from Medicare. About 23% report that they do not accept any new Medicare patients, and 34% report difficulty finding physicians who will accept referral of their Medicare patients."

It might also be surprising to learn that some practicing physicians today are deliberately downcoding or undercoding for their services out of fear that they will be accused of fraud if they bill for any high-level service. The higher service codes almost guarantee a Medicare audit or request for further documentation to support the level of service billed. This undercoding, in turn, leads to further exposure for those physicians who accurately code higher-level services because the latter now become statistical outliers and their outlier status will likely subject them to further costly encounters with the Medicare bureaucracy.

If a physician is merely accused of fraud, which the bureaucracy encourages patients to do, it frequently destroys trust between patient and physician even if the physician is ultimately cleared of committing any crime. HCFA has thus destroyed many patient-physician relationships because of its misguided and overzealous pursuit of fraud and abuse, even where none exists. I submit to you that when this atrocious government bureaucracy destroys the trust that patients place in their physician and destroys patient- physician relationships, it is destroying the very heart of the practice of medicine in this country.

It is self-evident that despite HCFA's campaign to criminalize the practice of medicine, the biggest source of fraud and abuse is the HCFA/Medicare bureaucracy itself. A man by the name of Ponzi, in fact, tried the same fraudulent scheme in years past whereby older investors were paid with current investors' money. It is an economically unsound and criminal enterprise that is doomed to collapse when the demographics change-as they will in the next couple of decades. The question is, will America wake up to what is really going on in this abusive socialized medicine program before it is too late? Or will everyone continue to try to live at the expense of everyone else to the bitter end?

Pamphlet No. 1073, May, 2000