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Can the federal government manage American healthcare?

| Jan 11, 2013 | Affordable Health Care Act, Legal, Medical |

The American Hospital Association is obviously fed up with the apparently whimsical denials of Medicare hospital reimbursements. It is aggressively pursuing a lawsuit against the Department of Health and Human Services that challenges the federal government’s management of healthcare.

Troubling questions about abuse of power

The American Hospital Association v. Sebelius, No. 1:12-cv-1770-CKK (D.D.C.) was filed barely two months ago, and the government has not even answered the lawsuit. Nevertheless, the American Hospital Association has already filed an eye-catching Motion for Summary Judgment that persuasively documents troubling questions about the federal government’s ability to fairly manage American healthcare.

Fear-mongering about Obamacare “death panels” remains foolishness. However, equally foolish is blind faith in the federal government’s ability to run American healthcare.

Odds are that governments–federal, state and local–will make a mess of things unless their power is properly checked. But the American Hospital Association’s lawsuit exposes the continued erosion of our practicing physicians’ authority to act as a critical check on federal power.

Erosion of the doctor-patient relationship

The genesis of the legal wrangle between the American Hospital Association and the government is the continued assault on the doctor-patient relationship—a dangerous trend.

In administering Medicare, the government relies heavily on “contractors.” Such contractors are private-for-profit companies that are granted broad powers and paid handsomely to do the work of the Department of Health and Human Services. One category of these federal government contractors is called a “Recovery Audit Contractor,” or RAC. The federal government gives RACs great power to overturn the medical judgment of treating physicians.

RACs’ startling authority to second-guess treating physicians

The federal government deploys RACs to “audit” the admitting physician’s judgment to hospitalize a Medicare patient who unquestionably requires medical treatment. In so doing, RACs literally second-guess the medical judgment of the licensed physician who was professionally and legally responsible for the patient’s care.

Why fret? Isn’t this simply a prudent measure to curb soaring healthcare costs? Perhaps, it could be. In actual practice, the essentially uncontrolled power of RACs, coupled with the way RACs make money, openly invites abuse.

The decisions that a patient needs treatment and requires hospitalization for that treatment lie at the heart of the doctor-patient relationship. The authority and the responsibility for making these medical judgments fall traditionally and appropriately to the admitting physician. A Medicare patient is hospitalized for treatment based on the physician’s best medical judgment. Medicare, then, reimburses the hospital under Medicare Part A: Part A is the portion of the Medicare Act that governs in-patient hospital reimbursement.

RAC’s get “a piece of the action”

A RAC “audit” occurs months or years after the treatment and hospitalization. The auditors don’t know the patient or the admitting physician. They just look at medical records. The auditor seldom, if ever, questions that the patient needed the medical treatment received.  Instead, the auditor focuses on second-guessing whether the treatment could have been provided out-patient. Without any explanation, RAC auditors can proclaim that the treatment could have been provided out-patient.

Based the auditor’s fiat, the reimbursement received by the hospital is “clawed back.” Hundreds of millions of dollars have been clawed back based only on an auditor’s say so.

And the RAC gets a piece of the action.

The more money a RAC claws back by reversing the judgment of the actual admitting physician, the more money the RAC makes. This built-in bias is remarkable in an era that seems otherwise intolerant of a whiff of conflict of interest.

The “Denial Policy”

There is more.

Since the RAC agrees that treatment was needed, but believes the treatment could have been provided out-patient, is the hospital at least reimbursed for the treatment it provided under Medicare Part B: the portion of the Medicare Act that governs out-patient hospital reimbursement? No.

The Department of Health & Human Services has made up a “policy” that denies Part B recovery to hospitals if they originally claimed under Part A. This “policy” is not supported by rulemaking procedures nor been explained or justified by the government.

In its lawsuit, the American Hospital Association persuasively argues that the “policy” is not merely arbitrary, but illegal.

The “Appeal Process”

What about appeal rights?

A complex and expensive administrative appeal process is theoretically available to aggrieved hospitals and patients. Some have taken this route, and uniformly those who appeal are awarded Part B recovery after suffering the cost of the lengthy appeal process. Has this consistent rejection the government’s “policy” by administrative appeal authorities led the government to adjust its practices? No. In fact, the federal government has instructed RACs to disregard the appeal results.

Insight into the ability of the federal government to fairly manage healthcare

The significance of questions raised about the actual practices of the federal government in managing Medicare is obvious. The federal government’s role in American healthcare is expanding exponentially.

The allegations in the American Hospital Association’s lawsuit are substantial and disturbing. The case and its implications serve as a timely reminder that we all have a stake in healthcare. As well, we all have a right, if not a duty, to scrutinize our government’s conduct as it assumes greater and greater control of our healthcare system.

© Jack Edward Urquhart