The Center for Public Integrity

The “Cracking the Codes” stories are but the latest in a series of Center pieces that illuminate questionable Medicare practices and policies by marrying traditional shoe-leather reporting with rigorous data analysis.

The foundation of these pieces is the Center’s access to about two terabytes of Medicare claims data — data that was obtained by the Center in 2010 as the result of a settlement from litigation against the Centers for Medicare and Medicaid Services.   

Delving deeply into this data has now helped us expose one of medicine’s dirty little secrets: medical providers garnering extra Medicare fees by “upcoding,” or billing for more extensive care than had actually been delivered. But it wasn’t easy. “Cracking the Codes” is the result of almost 20 months of often-tedious work.

That work began in early 2011, with preliminary analysis by data editor David Donald that summarized changes in hundreds of codes used by doctors and hospitals to bill Medicare over much of the past decade. Center investigative reporter Fred Schulte spent hours sifting those findings for story ideas, and subsequently discovered sharp spikes in higher-cost Medicare billing codes for routine patient visits to doctors. The code patterns indicated that short office visits paying doctors modest amounts had dropped off precipitously, while lengthier and higher-paid visits were rising dramatically. The trends ran counter to much of the medical research; the differences were costing taxpayers billions of dollars. 

Under Donald’s direction, former Center data analyst Elizabeth Lucas then embarked on a six-month journey through millions of Medicare records to determine the extent of the billing anomalies and  quantify the cost to taxpayers. The database was daunting indeed, consisting of scores of tables and thousands of columns, totaling more than 700 million claims.

For this series, the Center for Public Integrity and Palantir Technologies analyzed Medicare claims data obtained from the Centers for Medicare and Medicaid Services (CMS).

For privacy purposes and other reasons, the Center was limited to a 5 percent sample of national Medicare Part B data that contain claims for medical procedures, such as doctor office visits and emergency room procedures, and used mainly by researchers and consultants. Over and above the limitations of sampling, the data have only the quarter in which a procedure was performed, not actual dates. And a permanent federal injunction against the Department of Health and Human Services prevents data users from naming individual doctors who received payment for the claims. Some physicians subsequently contacted by the Center agreed to discuss their billing practices.

For the upcoding analysis, the Center and Palantir used a subset of the data submitted by physicians, hospitals and clinics from 1999 to 2008, the last year available at the time the data were acquired. The year 2002 was not included in the data, and any results for that year are imputed based on averaging 2001 and 2003 data. In addition, the Center and Palantir used CMS formulas for facility fees and co-payments, as CMS publishes formulas and modifier values to determine reimbursement amounts. Finally, Medicare Utilization reports published by CMS were used to look at specific billing codes for 2009 and 2010.

There simply weren’t enough hours in the day to justify the fees Dr. Angel S. Martin collected from Medicare.

On fifty-three separate days, the Newton, Iowa, general surgeon billed the government health plan for the elderly and other insurers for medical services that would have taken him more than 24 hours to complete, according to federal prosecutors.

The hours made the case a slam dunk for prosecutors. But they weren’t Martin’s only problem. Many patients recalled the briefest of visits with the doctor, even though Martin routinely billed Medicare for long, complicated treatments.

Every year, Medicare pays doctors more than $30 billion for treating patients. For office visits, doctors must choose one of five escalating billing scales — called Evaluation and Management codes — that most closely reflect the complexity of the treatment and the time it takes. The fees range from about $20 to about $140.

Medical groups argue that most doctors take pains to bill accurately. If anything, doctors tend to pick codes that pay them less than they deserve out of concern that they might otherwise get audited and face financial penalties, these groups say.

But cases such as Martin’s reveal what can happen when doctors are tempted to game Medicare by “upcoding” — billing for more extensive care than actually delivered. Raising the code by a single level on two patients a day can increase a doctor’s income by more than $15,000 over the course of a year and is not likely to raise suspicions, experts said.

Upcoding “is a big problem,” said Charlene Frizzera, a consultant who spent three decades at the federal Centers for Medicare and Medicaid Services and served as its acting administrator in the early months of the Obama administration.

Indeed. A jury convicted Martin on 31 counts of health care fraud for manipulating the Medicare pay scales.

What happened in Maine is a sobering reality check on the oft-repeated myth that getting rid of ObamaCare and other consumer protections is the answer to our health care problems. If the government will just get out of the way, the myth-makers would have us believe, the free market will magically transform our dysfunctional health care systems into one of the world’s very best.

The voters in Maine fell for magical thinking in 2010 when they turned over control of the legislature and governor’s office to candidates who promised to block ObamaCare and implement what they called “common sense” free-market solutions. Once they did, they assured voters, insurance premiums would fall and more people would have access to affordable care.

Sure enough, soon after being sworn in, lawmakers passed legislation that in many ways took Maine in the opposite direction of where President Obama wanted to go. When newly elected Republican Governor Paul LePage signed the bill into law —a bill enthusiastically endorsed by insurance companies — many consumer protections enacted over two decades disappeared. Especially hard hit: people living in rural areas and folks over 40.  

Among other things, the new law abolished protections for rural families that had required insurers to have at least one doctor in their provider networks within 30 miles of where those families lived and at least one hospital within 60 miles. The law also allows insurance companies to effectively double rates for older residents. That provision is affecting not only individuals and families, but also small businesses that employ older workers. Within months of the bill’s passage, insurers began jacking up the rates they charged businesses with older workers by 90 percent or more.

Even so, backers of the new law continued to insist that after it had been in effect for awhile, the measure would help a majority of Mainers.

While listening to the promises to repeal ObamaCare during the Republican National Convention, I was reminded of what those of us in the health insurance industry said when our friends in Congress were able to block passage of President Clinton’s health care reform legislation 18 years ago.

Like the politicians in Tampa, we insisted then that a big government program not only wasn’t needed, but would be harmful — that what the government really needed to do was get out of the way and let the free market work.

Insurance company spokesmen like me assured the public that our then-novel managed care plans, coupled with the invisible hand of the market, would do the trick. Leave it to us, we said, and we’ll get medical costs under control and enroll every American in a good HMO.

The proponents of a pure free-market health care system hope that Americans have amnesia and can be persuaded to blame President Obama for the problems that grew almost immeasurably worse between the demise of the Clinton plan and the passage of the Affordable Care Act. They want us to believe, despite overwhelming evidence to the contrary, that health insurers and the largely unfettered, loosely regulated marketplace can somehow turn things around. And that we should reward insurers for their failure by turning the Medicare program over to them.

Mitt Romney's selection of Rep. Paul Ryan as his vice-presidential nominee has vaulted Medicare to the top tier of election issues, thanks to Ryan's proposal that the entitlement program be converted to a system of "premium support" that would provide subsidies for elderly beneficiaries to buy insurance on the private market. Judging by the fiery rhetoric from both campaigns, Medicare seems certain to remain a high-profile topic for the remainder of the contest. 

But Medicare is a complex topic, and the charges and counter-charges seem likely to yield more heat than light for a confused electorate. A recent story by FactCheck.org provides a helpful reality check on the finger-pointing, but there's been little of substance illuminating Medicare's increasingly precarious finances and its often-confusing spending choices. 

The Center's Manipulating Medicare series has attempted to fill that void. In the next month, we'll be adding to this reservoir of reporting with new investigative pieces on billing procedures by doctors and hospitals that have added tens of billions of dollars to our Medicare tab.

In the meantime, catch up with these examinations of the Medicare system:

As the Republican convention gets underway today in Tampa, we can expect to hear the politicians and delegates gathered there — including GOP nominee Mitt Romney — rail against “Obamacare”, insisting that what we need instead of a “government takeover of health care” is “patient-centered” care, although what that would look like hasn’t been disclosed.

If recent statements by Romney and his VP pick Paul Ryan are an indication of the rhetoric we’ll likely hear, get ready for speech after speech telling us that Obamacare will “cut” $716 billion from Medicare and cost small businesses a bundle.

In anticipation of these sorts of misrepresentations, doctors from all over the country — all members of a four-year-old organization called Doctors for America — have traveled to Florida to serve as a truth squad. And while they’re dispensing facts, they’ll also be providing more than a little free care. When the GOPers leave the Sunshine State, the doctors will hop on a bus and head to Charlotte to try to persuade the politicians and delegates who will gather there that they need to start aggressively defending the reform law.

Doctors for America is a bipartisan grassroots organization of 15,000 physicians and medical students from all 50 states. The organization’s executive director, Dr. Alice Chen, said the doctors decided on the road trip because “politics, not patients, has been driving the health care debate and is threatening to roll back the promise of a better health care system.”

Chen says the mission of the group is to build a health care system that works for everybody, not just the wealthy and fully insured. The group’s message: “Stop messing with health care reform because people’s lives are at stake.” Its “Patients Over Politics Bus Tour," which will make stops in Atlanta and Columbia, S.C. and several other cities between Tampa and Charlotte, will feature press events, town hall-type forums, and preventive health screenings.