Playing the game: Exploring the grey area of sanctioned Medicare abuse

Read any FBI or Department of Justice release and you're bound to find a strongly worded statement from a prosecutor, investigator or, if the case is big enough, the Department of Health and Human Services Secretary or the Attorney General.

Take this release from the DOJ, announcing a nationwide takedown of 90 doctors, nurses and medical professionals connected to a $260 million Medicare fraud scheme. It was a prized catch, and the statements from federal administrators read like a line from a Liam Neeson movie. Attorney General Eric Holder called Medicare "a sacred compact with our nation's seniors" and vowed to aggressively protect it. Former Secretary Kathleen Sebelius said the charges would send a "strong, clear message to anyone seeking to defraud Medicare: You will get caught and you will pay the price. We will protect a sacred trust and an earned guarantee."

It's the federal administrator edition of Mad Libs, injected with an extra boost of public relations wordplay. You can almost picture them staring intimidatingly into the mirror, searching for flashy catchphrases to recite as the camera pans to them cuffing the bad guy. It's always some iteration of the same theme: In the end, you can't beat the system; the system beats you.

Of course, nothing in this world is so black and white. I only bring up this reoccurring, frequently benign phraseology because, when juxtaposed with the recent Wall Street Journal investigation into lucrative Medicare discharges based on payments rather than progress, I can't help but wonder if the same system that verbally undresses some alleged fraudsters with gleeful vigor is extending an outreached hand to others.

The Journal investigation paints an unsettling picture of for-profit long-term hospitals that disproportionately discharge patients on days in which they will receive the highest Medicare reimbursement. Based on information obtained by the newspaper, it appears those patient care decisions are predicated on money rather than progress.

Specifically, the article digs into Kindred Healthcare Inc., a long-term hospital in Houston that discharged a 79-year-old patient, Ronald Beard after 23 days, collecting more than $35,000 for his care. Had the hospital discharged him just one day earlier, it would have received $15,000 less.

Medicare sets certain length-of-stay thresholds for long-term hospital reimbursement depending on the diagnosis of the patient. The thresholds are calculated at five-sixths of the average length-of-stay for that diagnosis. Short stays are reimbursed at a lower rate, but once a patient hits that threshold, the reimbursement transitions to a larger lump sum payment.

The formula creates a nice three-day window in which hospitals have the highest profitability in caring for a Medicare patient. In an 18-month window between 2011 and 2013, one Kindred hospital discharged eight times as many Medicare patients on the day they reached their threshold compared to the day before, the Journal reported.

It would be one thing if the Kindred system was merely an outlier, but it isn't. Medicare data between 2008 and 2013 shows that long-term hospitals discharged more than 71,000 Medicare patients on the first day higher lump sum payments kicked in, regardless of the diagnosis. Just one day before, only 12,600 patients were discharged.

But correlation does not imply causation, which is why the Journal spoke with former long-term hospital executives who could provide some context. Executives indicated administrative pressure on doctors to discharge patients during the most lucrative time frame was not uncommon. In some cases, physicians ordered extra care in order to keep patients longer or discharged patients before they were ready to leave. Some executives reported earning bonuses that were dependent on discharging patients on the threshold dates.

Robert Marquardt, a former CEO at a long-term hospital owned by Select Medical Corp. said administrators were "very intense" about managing discharges to maximize profits. But Marquardt also brushed this tactic aside. "You might play the game a bit, but you would never put a patient at risk," he told the Journal.

The family of Ronald Beard, who endured a series of subsequent hospital stays before dying two weeks after Kindred was reimbursed $35,000 for his stay, might argue otherwise.

Perhaps what is most troubling about all of this is not that administrators are potentially making care decisions based on financial reimbursement (although that alone is disconcerting), but that the opportunity exists at all. The system that so righteously protects the "sacred" Medicare program is sending a message that's a little more muddled, and a lot more troublesome: You will get caught, unless of course you play the game.

This isn't the first time someone has directed a light at the unbalanced financial incentives tied to long-term hospital discharges. Last year, MedPAC found the same kind of statistical spike associated with length-of-stay thresholds. The report indicated that financial incentives and clinical indicators carried an equal if not unbalanced influence on patient discharge decisions. The committee recommended that the Centers for Medicare & Medicaid Services lower the payment penalty for discharging patients before the threshold as a way of eliminating those financial incentives.

Here we are, a year later, having hardly moved at all. When you boil it all down, what we're left with is a form of waste and abuse protected by the same system that excitedly derides fraudsters that inappropriately bill Medicare. It's not as brazen as a kickback scheme or billing for services that were never provided, but it settles into that gray area of covert waste and abuse. Fail to close the loopholes and you can guarantee someone will find them and dive through headfirst.

Of course, you won't find the administrators of these long-term hospitals hauled in for fraud or false claims, nor will you read any self-congratulatory movie hero catchphrases from the feds. Suddenly, the tough-guy rhetoric rings a little hollow. - Evan (@HealthPayer)

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