The Center for Public Integrity

Paula Sellers suspected the small Nevada hospital where she worked was overcharging Medicare and other health insurers for some emergency room services.

Sellers ran Boulder City Hospital’s health information department, which helped apply the complex series of Medicare billing codes doctors and hospitals must use to get paid for treating the sick.

But Sellers alleges in a lawsuit that her bosses told her to “back off” when she doubted the accuracy of the coding — and fired her in May when she refused to sign off on it.

“When she tried to complain, she got terminated,” said her lawyer, Jesse Sbaih. The wrongful termination lawsuit, filed in July in Clark County District Court in Las Vegas, has been moved to federal court, where it is pending. The hospital and its billing agent deny the allegations.

Every year, hospitals and doctors use the five-digit billing codes, developed by the American Medical Association, to bill Medicare for hundreds of millions of office visits and other services. Hospitals use these “Evaluation and Management” codes to bill for emergency room and outpatient physician charges and other fees. In past years, Medicare has for the most part paid medical bills with few questions asked, even though the coding process can be confusing and subjective.

But billing practices are facing new scrutiny as Medicare officials and other insurers seek ways to put the brakes on escalating health care costs. On Sept. 24, U.S. Health and Human Services Secretary Kathleen Sebelius and Attorney General Eric Holder notified five groups representing hospitals and medical professionals that they could face criminal prosecutions for padding bills by choosing higher-paying codes even if the services delivered didn’t justify them — a process known as “upcoding.”

If you want to get a clearer understanding not only of why the U.S. health care system fails so many of us but, more importantly, how we can transform it to make it the best in the world, go to the movies this weekend.

Regardless of your political affiliation or your opinion of Obamacare, you will find “Escape Fire: The Fight to Rescue American Health Care,” a compelling and convincing indictment of a health care system controlled by special interests that profit from the status quo and that spend millions of dollars every year to make sure nothing happens in Washington that would be harmful to their bottom lines.

You will also find that it offers some common sense ideas of how to fix many of the things about our system that are badly broken, including fixes that won’t require an act of Congress but that will require some innovative thinking and risk-taking on the part of health care providers, employers and other stakeholders in the private sector.

"Escape Fire" describes how health care in America has turned into a business, how the quest for money has hurt the quality of care provided to patients and how it has kept millions of us from having access to even mediocre care.

As a consequence of allowing this to happen, our system has become littered with perverse incentives, such as paying for medications and procedures that address only the symptoms but not the underlying causes of illness and disease, and not paying for prevention. Because of those perverse incentives, we have a system that rewards quantity instead of quality and that leads to unnecessarily expensive and often harmful overtreatment. And we spend enormous amounts of money on the latest high tech equipment but give short shrift to high-touch care, which in many cases is exactly what the patient needs.

Top federal officials are stepping up scrutiny  for doctors and hospitals that may be cheating Medicare by using electronic health records to improperly bill the health plan for more complex and costly services than they deliver.

U.S. Health and Human Services Secretary Kathleen Sebelius and Attorney General Eric Holder notified five medical groups of their intention to ramp up investigative oversight, including possible criminal prosecutions, by letter on Monday.

The government action follows The Center for Public Integrity’s “Cracking the Codes”  series,  published last week. The year-long investigation found that thousands of medical professionals have steadily billed higher rates for treating seniors on Medicare over the last decade — adding $11 billion or more to their fees.

The Center’s probe uncovered a broad range of costly billing errors and abuses that have plagued Medicare for years—from confusion over how to pick proper payment codes to outright overcharges. The findings indicated that Medicare billing problems are worsening as doctors and hospitals switch to electronic health records.

 “There are troubling indications that some providers are using this technology to game the system, possibly to obtain payments to which they are not entitled,” the letter states, adding: “There are also reports that some hospitals may be using electronic health records to facilitate ‘upcoding’ of the intensity of care or severity of patients’ condition as a means to profit with no commensurate improvements in the quality of care.”

The months-long Center for Public Integrity investigation into the Medicare program has uncovered a textbook example of the expensive consequences of  what’s known as “regulatory capture.” Doctors and hospitals are likely being overpaid billions of dollars, which is hastening the depletion of the Medicare trust fund, because lawmakers and regulators put lobbying and professional groups representing health care providers in charge of writing the rules that determine reimbursement.  

And to make matters worse, to maximize revenue and profits, some doctors and hospitals have figured out how to game the system to their financial advantage by abusing what has been held out as a means to improve care and reduce administrative costs —electronic health records.  

“Regulatory capture” is a term that describes an all-too-common situation at both the federal and state levels in which special interests — in this case groups like the American Medical Association — dominate regulatory bodies that set the rules and make important decisions affecting them. In many regards,  the Centers for  Medicare and Medicaid Services (CMS) has become a “captured agency” as a result of decisions made decades ago — with the full blessing of both the White House and Congress — to pretty much let health care providers determine how — and how much — they will be paid.

Medical professionals who cheat Medicare by billing for more complex and costly services than they deliver threaten to drain the elderly health-care program’s already shaky finances, Sen. Charles Grassley said Thursday.

The Iowa Republican’s comments came in reaction to The Center for Public Integrity’s “Cracking the Codes”  series published this week. The investigation found that thousands of medical professionals have steadily billed higher rates for treating seniors on Medicare over the last decade — adding $11 billion or more to their fees.

Grassley called the findings “disturbing,” though “not surprising” because any time Medicare creates a new payment structure, “a cottage industry develops to teach providers how to maximize revenue in the system.” 

The Center’s year-long examination  uncovered a variety of costly billing errors and abuses that have plagued Medicare for years—from confusion over how to pick proper payment codes to outright overcharges. The findings also suggest the problems are worsening as doctors and hospitals switch to electronic health records.

 Medicare pays doctors for office visits using five escalating payment codes, which range from a minimal visit of about five minutes time for about $20 to about $140 paid for more complex treatments that generally take 40 minutes or more of face-to-face time with the doctor. Federal officials expect a medical practice to report a range of the five codes because some patients require more time and effort to treat than others. Medicare uses the scales to pay for more than 200 million office visits each year and other doctor services that cost taxpayers more than $33 billion.

Eleven years ago, Dr. Kathryn Locatell’s testimony at a U.S. Senate hearing on alleged Medicare billing abuses generated a rush of media coverage, but little lasting reform.

Locatell, a California physician, helped expose medical billing consultants who made a living teaching doctors how to use the billing system to reel in higher fees.

The techniques ranged from billing for medical treatments that weren’t needed to packing a patient’s file with irrelevant details as a means to justify higher, more lucrative, Medicare billing codes.

“The information presented to us at the seminars did not include any method of … ensuring that the services billed for were medically necessary,” Locatell testified at the June 2001 Senate Finance Committee hearing.

Despite much legislative hand-wringing and media attention — CBS Evening News told her story prominently — little changed in the aftermath of the congressional probe.

More than a decade later, federal officials are still struggling to make sure doctors code accurately and charge Medicare only for treatments that are medically necessary, a Center for Public Integrity investigation has found.

The Center’s analysis of Medicare billing records found that more than 7,500 doctors billed the two top paying codes for three out of four office visits, a sharp rise from the start of the decade. Government records also show medical professionals billing billions of dollars in suspect payments in recent years through coding errors.

Judging by their bills, it would appear that elderly patients treated in the emergency room at Baylor Medical Center in Irving, Texas, are among the sickest in the country — far sicker than patients at most other hospitals.

In 2008, the hospital billed Medicare for the two most expensive levels of care for eight of every 10 patients it treated and released from its emergency room — almost twice the national average, according to a Center for Public Integrity analysis. Among those claims, 64 percent of the total were for the most expensive level of care.

But the charges may have more to do with billing practices than sicker patients. A Baylor representative conceded hospital billing for emergency room care “did not align with industry trends,” but said that the hospital since 2009 has reined in its charges.

The Texas hospital’s billing pattern is far from unique. Between 2001 and 2008, hospitals across the country dramatically increased their Medicare billing for emergency room care, adding more than $1 billion to the cost of the program to taxpayers, a Center investigation has found. The fees are based on a system of billing codes — so-called evaluation and management codes — that makes higher payments for treatments that require more time and resources.

Use of the top two most expensive codes for emergency room care nationwide nearly doubled, from 25 percent to 45 percent of all claims, during the time period examined. In many cases, these claims were not for treating patients with life-threatening injuries. Instead, the claims the Center analyzed included only patients who were sent home from the emergency room without being admitted to the hospital. Often, they were treated for seemingly minor injuries and complaints.