Sunday, March 6, 2011

Healthcare Fraud Targets Both Public and Private Programs

It is difficult to get a hard number on the extent of fraud in the healthcare arena. In an earlier post we quoted a number of $60B that was associated with Medicare fraud, but was not attributed to any source. That number was subsequently found in an FBI statement which seemed to be focused on Medicare. CNN quoted a number of $100B but again in is not clear the source, and it is not clear that it includes the private sector. There is an estimate found in an FBI report that definitely includes both public and private sectors: 3-10% of healthcare expenditures are fraudulent. The total healthcare expenditure this year is expected to be $2.5T, meaning $75B-250B is involved in criminal activity. Here are some statements from that report.

“All health care programs are subject to fraud; however, Medicare and Medicaid programs are the most visible. Estimates of fraudulent billings to health care programs, both public and private, are estimated between 3 and 10 percent of total health care expenditures. The fraud schemes are not specific to any area but are found throughout the entire country. The schemes target large health care programs, public and private, as well as beneficiaries.”

“One of the most significant trends observed in recent health care fraud cases includes the willingness of medical professionals to risk patient harm in their schemes. FBI investigations in several offices are focusing on subjects who conduct unnecessary surgeries, prescribe dangerous drugs without medical necessity, and engage in abusive or sub-standard care practices.”

“The Auto Accident Insurance Fraud Initiative was launched in 2005 to address fraud schemes, including organized staged accident rings and related fraudulent claims schemes. Further, the initiative targets a trend of increasingly aggressive participants in staged accident schemes who present a growing danger to others on the road. This crime problem is a threat to innocent drivers, the financial stability of the insurance industry, and the cost of auto insurance to the public.”
In the discussion of Medicare fraud there was a strong component of organized crime activities—the usual subjects. It soon becomes clear that criminal activity pervades the entire industry. The FBI seemed especially proud of this press release (9/2009).
“American pharmaceutical giant Pfizer Inc. and its subsidiary Pharmacia & Upjohn Company Inc. (hereinafter together “Pfizer”) have agreed to pay $2.3 billion, the largest health care fraud settlement in the history of the Department of Justice, to resolve criminal and civil liability arising from the illegal promotion of certain pharmaceutical products, the Justice Department announced today.”

“Pharmacia & Upjohn Company has agreed to plead guilty to a felony violation of the Food, Drug and Cosmetic Act for misbranding Bextra with the intent to defraud or mislead. Bextra is an anti-inflammatory drug that Pfizer pulled from the market in 2005. Under the provisions of the Food, Drug and Cosmetic Act, a company must specify the intended uses of a product in its new drug application to FDA. Once approved, the drug may not be marketed or promoted for so-called “off-label” uses – i.e., any use not specified in an application and approved by FDA. Pfizer promoted the sale of Bextra for several uses and dosages that the FDA specifically declined to approve due to safety concerns. The company will pay a criminal fine of $1.195 billion, the largest criminal fine ever imposed in the United States for any matter. Pharmacia & Upjohn will also forfeit $105 million, for a total criminal resolution of $1.3 billion.”

“In addition, Pfizer has agreed to pay $1 billion to resolve allegations under the civil False Claims Act that the company illegally promoted four drugs—Bextra; Geodon, an anti-psychotic drug; Zyvox, an antibiotic; and Lyrica, an anti-epileptic drug—and caused false claims to be submitted to government health care programs for uses that were not medically accepted indications and therefore not covered by those programs. The civil settlement also resolves allegations that Pfizer paid kickbacks to health care providers to induce them to prescribe these, as well as other, drugs. The federal share of the civil settlement is $668,514,830 and the state Medicaid share of the civil settlement is $331,485,170. This is the largest civil fraud settlement in history against a pharmaceutical company.”
While one is pleased to know that this sort of activity was detected and presumably at least put on pause, where were the criminal indictments for criminal activities? There is no mention of anyone going to jail for what are obvious crimes. A few billion dollars in fines is a slap on the wrist for a major drug company. Lest one think this is an exceptional case, here is a litany of abuses by drug companies in the mental health area.
"A series of prominent lawsuits has been brought over the past few years in the United States against the manufacturers of anticonvulsants and atypical antipsychotics for having hidden their side effects and for having marketed them ‘off label’ towards patient populations not approved by the FDA. The sums paid out in fines or settlements by the pharmaceutical companies involved are staggering, and they give an idea of how disastrous the effects of their medications have been: Warner-Lambert/Parke-Davis (now Pfizer) has paid more than $430 million for marketing Neurontin for bipolar disorder; Lilly had to pay a total of $2.6 billion for the illegal marketing of Zyprexa; Pfizer was forced to pay $301 million for the illegal marketing of the atypical antipsychotic Geodon. AstraZeneca has agreed to pay $520 million to settle federal investigations into its marketing of Seroquel and has already spent $593 million in legal fees defending itself against the 10,381 individual lawsuits brought by patients for the side effects caused by the drug. Johnson & Johnson and its subsidiary Janssen have been sued by nine American states for the off-label marketing of Risperdal."
Again, we have widespread criminal activity in the pharmaceutical industry—but no criminals going to jail.

Not all crime appears in such a glaring form. Much of it is an incessant dripping as funds are continually extracted from the system by healthcare providers. Dr. Senelick illustrates how the system works.
“The Coalition Against Insurance Fraud estimates that fraudulent claims and billing by health care professionals accounts for between $60-90 billion a year. Who is driving this fraud? Are doctors cloaking themselves in the sanctity of patient care and then pointing their finger at the other guy? The truth is that junk science, inappropriate testing and unnecessary procedures are being promoted by all of the different sectors of the health care pie. For example, a person may see their automobile accident as an opportunity to make money or a physician may order excessive tests in their office to make up for the reductions in what they get paid for their services. Fraud is around us in many different forms.”

“The medical provider may be driving the process by having the patient return for unnecessary testing and treatments. Just open the newspaper and look at the ads for a "free" initial evaluation. How many of these people are examined and told that everything is normal and there is no need to return? Once in the door, the testing and treatment begins and continues for far too long. A sting operation may catch patients, professionals and attorneys working together. People feign injury and are sent to a healthcare professional who will order numerous unnecessary tests and therapies, documenting injuries that don't exist. It's hard to believe, but it is not a rare occurrence. Remember the estimate of between $60-90 billion dollars a year in fraudulent claims?”
Need we remind ourselves that patients with back or neck pains really do provide a license to steal?

As in society in general, only a small fraction of healthcare professionals are dishonest, but it only takes a few percent to cause great personal and financial loss to society. Prescribing unnecessary medical tests to enhance ones earnings is fraud and it should be treated as a crime.

I would hope we could spend more time cleaning up this mess and less time planning on how we will cut benefits to reign in medical costs.

1 comment:

  1. The health care provider passes the costs along to its customers. and because of the pervasiveness of health care fraud, statistics now show that 10 cents of every dollar spent on health care goes toward paying for fraudulent health care claims.

    Todd Foster


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