Medical Device Daily Washington Editor

Keeping a lid on the Medicare budget by cutting down on fraud and improper payments is an ongoing job at the Centers for Medicare & Medicaid Services, which announced last week that a pilot program that ran from 2005 to this past March saved taxpayers almost $700 million over three years.

Congress, however, is not wholly supportive of the program (Medical Device Daily, March 4, 2008), and hospitals, which have been the principal targets of the program, also have problems with recovery audit contractors (RACs). Makers of implantable cardioverter defibrillators (ICDs) may also want to track the program, given that the agency has reclaimed tens of millions of dollars for what it sees as unnecessary use of the devices.

RACs are paid a contingency fee, which is alleged to have led to abuses, but a spokesman for the American Hospital Association (AHA; Chicago) also says that while the fees are congressionally mandated, CMS does have some leeway that could tamp down on some of the alleged abuses.

According to CMS, the first overpayment notices will address only no-brainer billing issues, such as when "a healthcare provider charged Medicare for conducting three colonoscopies on the same patient on the same day" due to coding errors.

The statement notes that providers appealed about 14% of the determinations roughly one third of which were overturned and that the program "has cost only $.20 for each dollar collected." The agency also claims that the rate of erroneous payments has dropped from 14.2% in 1996 to 3.9% last year.

The June 2008 report on the program identifies at least one area of interest to device makers, stating that the agency has deemed medically unnecessary more than 2,200 installations of ICDs, which has led to the recovery of more than $64 million. However, the RAC review has also led to reimbursement to hospitals for claims that were underpaid to the tune of almost $38 million.

Don May, VP for policy at AHA told Medical Device Daily that "hospitals are committed to doing the best we can at ensuring our billing and coding are accurate" and that the association is of the opinion that because a number of appeals are still pending, "these numbers are not done moving yet."

"While there are overpayments, we often disagree with the findings," May said. He also said: "We don't think RACs are the best body to assess medical necessity," and added contingency fees may warp decision making when a claim appears to fall into a gray area. However, he acknowledged that CMS is going to review any new areas of interest on the parts of RACs before any such audits can be performed and that RACs will themselves be audited by an independent contractor.

However, May said that there is little to be gained by internalizing the audit program to CMS. "I think it's more important that the process is fair," he said, alleging "the RACs were abusive in a lot of their behavior."

"They were aggressively denying claims in the demonstration program," May contended, noting "there was a hospital in Florida that had a thousand medical records requested in one month."

As for whether RACs should be paid a flat fee, May said "we think there's something to that," in part because getting rid of the contingency fee would bring the focus onto "more than just those high-ticket items in inpatient care." He said AHA would like to see an equal incentive to look for all errors, not just errors in a hospital setting."

The amounts of the contingency fees were confidential in the demo program, but CMS "has said moving forward that it will release those fees," May said. All the same, AHA opposes the fees. "We are asking our friends in Congress to get rid of the contingency fee," May said, referring to H.R. 4105, the Medicare Recovery Audit Contractor Program Moratorium Act of 2007, which would do precisely that.

Jerry Walters, the director of the financial services group at CMS, told MDD, "I can understand" the stories of abusive practices by RACS, "but I do not believe they're true."

Walters said the RACs had to bid for the percentage fees that they charge and that they are not paid for claims that are overturned. He also pointed out that the RACs are paid the same fee for finding instances of underpayment to hospitals, adding "that symmetry is very important."

The number one complaint from industry, Walters said, was "transparency."

"They would like to know what the contractors are looking at" during the course of the audits so that hospital administrators know where to focus their compliance efforts. He declined to address H.R. 4105, but said "I believe that the results of the pilot program speak for themselves."

PhRMA urges no dinners out for docs

Relations between doctors and device makers have spent a lot of time under the magnifying glass, but the same can be said for the interactions of drugmakers and docs. Hence, the announcement last week by the Pharmaceutical Research and Manufacturers Association (PhRMA; Washington) that it would recommend no freebie dinners for doctors outside the office

According to PhRMA's July 11 announcement, "among the code's new elements are a ban on restaurant meals for doctors and a prohibition on company payments for entertainment and recreation, such as tickets to the theater or sporting events, sporting equipment or leisure or vacation trips."

Former Congressman Billy Tauzin, PhRMA's president, said the association has "heard a lot of noise about wining and dining physicians," hence the elimination of out-of-office meals. However, take-out dining for a doc's office during work hours is still within standards.

Chris White, general counsel at the Advanced Medical Technology Association (AdvaMed; Washington), told Medical Device Daily that the device industry already has grappled with this issue, but "we view it as a positive development and I'm encouraged by PhRMA's efforts to provide clear guidance."