FRAUD: Health Plans Under Federal Scrutiny

      Today's Wall Street Journal reports that as prospects wane for patients' rights legislation, the federal government is opening up a new front in the HMO wars -- prosecuting Medicare and Medicaid HMO plans for fraud. The focus of law enforcement officials in some cases echoes patients' rights issues, such as investigations into "systematic denial of promised treatments in order to boost profits" and "unwarranted delays in referral of patients to primary care doctors." However, the fraud cases also pertain to "the accuracy of HMOs' reporting on 'special status' Medicare beneficiaries ... who command higher reimbursements," and "cherry picking" -- illegally screening seniors in order to select the healthiest enrollees. The Journal reports that "[m]ore than 10" HMOs are currently under investigation. The legal weapon being employed by the government is the False Claims Act, "which provides for penalties of as much as $20,000 for each false claim, treble damages and rewards for whistleblowers." Deputy Attorney General Eric Holder said, "Unscrupulous plans should be on notice that we will not tolerate fraudulent practices, particularly those that pose a threat to the health or safety of patients."

I'm Gonna Get You, HMO
      The managed care industry is, "not surprisingly," sharply criticizing the new federal "fraud ramp-up." Wendy Krasner, a managed care attorney, said, "Federal officials assume there's a lot of fraud, but they're out in left field." She added, "'The government can't have it both ways,' relying on managed care to make the tough calls to cut costs but threatening prosecution if it is unhappy with treatment decisions." Brent Saunders, president-elect of the National Health Care Compliance Association, contends that he heard one federal law enforcement official make an "I'm-going-to-get-you-managed-care-speech." Saunders accused the official who made the remark, assistant U.S. attorney for Philadelphia James Sheehan, of searching out cases "to send a message to the industry." The Journal reports that "industry executives bristle at being ordered to set up internal compliance plans" and they are "also up in arms over a requirement that they attest to the accuracy of any data that may affect their payment rates."

It's Not That Easy
      According to the Journal, prosecuting HMO fraud cases may be difficult due to the lack of a paper trail, meaning that "investigators must rely heavily on whistleblowers from inside the health plans." Furthermore, "some Clinton administration officials are squeamish about cracking down on HMOs right now," fearing it may spur more withdrawals. Managed care plans hit with fraud charges in the past year include Massachusetts Blue Cross/Blue Shield, Blue Cross of Northeastern Pennsylvania and Mutual of Omaha. And whereas federal investigators are focusing on Medicare-related fraud, the Journal notes that state officials are looking into Medicaid HMOs. Carolyn McElroy, director of Maryland's Medicaid Fraud Control Unit, "plans to analyze a year's worth of complaints against Medicaid HMOs to see if there are patterns of wrongful denials of care" (McGinley/Cloud, 10/19).

Florida Investigates Withdrawals
      In related news, Florida's attorney general and insurance commissioner have demanded "marketing and other records from seven health plans" who recently withdrew from 25 counties and dropped 52,000 Medicare enrollees, "to see whether the insurers violated antitrust laws or engaged in unfair trade practices." The Orlando Sentinel reports that Florida is thus far the only state to probe the flood of HMO Medicare withdrawals that began with the Health Care Financing Administration's decision not to allow a re-adjustment of benefit structures. Insurance Commissioner Bill Nelson (D) said, "We're witnessing a lot of finger-pointing ... but the bottom line is people are getting hurt." Susan Pisano, spokesperson for the American Association of Health Plans, noted "that state officials decided to launch their investigation just three weeks before the election." She charged that Nelson and state Attorney General Bob Butterworth (D) are "putting partisan politics ahead of the public interest." Nelson responded that "the timing of the probe coincides with decisions by the seven insurers to withdraw" (Pack, 10/18).