Each year the Office of Inspector General at the U.S. Department of Health and Human Services releases a work plan saying what it intends to focus on in its effort to detect fraud, abuse, and waste in federal health care spending.  This year’s plan came out on January 31, four months after it usually appears.  It has a mix of old and new concerns, covering all types of providers.  We will look at many of them, but first let’s have some perspective.

The Vast Scope of American Health Care

We all know American health care is huge and employs vast numbers of people.  But let’s remind ourselves of some real numbers.  According to the Kaiser Family Foundation, there were about 835,000 physicians in the U.S. at the end of 2012.  The AFL-CIO reports there were 2,725,000 registered nurses in 2011.  It is probably impossible to say who exactly is and is not a healthcare executive, but the American College of Healthcare Executives had 44,600 members in 2013.

The U.S. Bureau of Labor Statistics counts jobs, not people, and here are some of its latest numbers:

Click here to view table.

The cost of American health care is, likewise, huge.  For 2013, it was close to $3 trillion.  Of this, more than half a trillion dollars was for Medicare, and more than a quarter of a trillion dollars was for Medicaid and the Children’s Health Insurance Program (CHIP).  These, of course, are programs of concern to the OIG.  They are the reason for its work plan.

As I said in the first paragraph, the point of these numbers is to give some perspective to the work plan.  So now, let’s turn to what the OIG actually did recently, because the truth is that OIG is swamped by the size of its job, so it has to prioritize.  And beceause the OIG prioritizes, providers can too, focusing their compliance efforts on the things that are demonstrably the most important ones to get right.

The Scope of OIG Enforcement

OIG is not the only enforcement agency.  The Centers for Medicare and Medicaid Services (CMS), the U.S. Department of Justice, and State agencies and prosecutors are also involved.  But the OIG alone reports that for 2013 it recovered $5.8 billion.  The great majority of this – that is, $5 billion – was from its investigative arm, and the rest was from audits.  Although $5.8 billion is a very large number, it is only about 0.8% of all Medicare, Medicaid, and CHIP spending.  Even if you assume that 10% of Medicare, Medicaid, and CHIP money is misspent (as is often said, though without much empirical data behind it), the OIG is only recovering a bit more than 8% of all the waste, abuse, and fraud.  Even after we add the efforts of the other agencies, most of the misspent money is undetected.

Turning from money to people, the OIG reports that – last year – it excluded 3,214 individuals and entities from the federal health care programs.  There were 960 criminal cases and 472 civil actions of every kind.  If you compare these numbers to the sampling of providers listed above, you see right away that the people punished by the OIG are just a tiny fraction of everyone in health care.  Even if you set aside the aides, the techs, and the assistants, the number of people punished is a tiny fraction of all the professionals at the top of the jobs pyramid.

Who Is Being Punished?

The OIG publishes lists of people it has punished, and these lists tell a lot about what the OIG is really targeting.  In the period from mid-October 2012 through mid-October 2013, here is what was reported regarding Civil Money Penalty (CMP) cases settled by OIG:

Click here to view table.

At the same time, OIG reports on a number of Stark self-referral and anti-kickback cases settled by the OIG.  Violations here included excessive physician compensation, free space, discounts, free trips, and cash payments.

From these numbers alone, it seems the OIG is not terribly busy, but what should be concerning is the scope of criminal prosecutions and civil cases in which the OIG cooperates with the U.S. Department of Justice.  For the six months from July 1 to December 31, 2013, there were 280 indictments, guilty pleas, settlements, and convictions; the number of separate people and companies involved in these cases is larger than that.  Looking at the month of January 2014, alone, we saw – among many other cases – a physician sentenced to prison and ordered to pay $2 million in restitution for providing medically unnecessary services, a hospital ordered to pay $16.5 million for unnecessary cardiac services, seven oncologists ordered to pay $2.6 million for using unapproved drugs, and a “patient recruiter” sentenced to jail for kickbacks and money laundering.  Others who were convicted, pled guilty, or settled claims include ambulance companies, home health agencies, physical therapy providers, healthcare executives, DME providers, psychologists, and pharmacists.  Clearly, there is a lot more to worry about regarding U.S. Justice and the OIG working collaboratively than there is with the OIG working independently, not only in the relative number of cases, but also with regard to the severity of the punishments.

The Work Plan in Context

Now let’s compare what the OIG and the Department of Justice have been doing recently to some of what OIG says it will be looking at in the coming year.  As you see above, there has been a lot emphasis on up-coding, unbundling, medical necessity of services, and services not actually being provided.  The new work plan contains lots of items that fit this pattern, for example:

  1. Hospitals
  • Billing outpatient evaluation and management services (E&M) at the new patient rate.
  • Proper use of the new inpatient admission criteria.
  • Performance of cardiac cath and biopsy during the same operating session.
  • Other inpatient and outpatient billing requirements.
  1. Physicians
  • Medical necessity of high-cost radiology.
  • Appropriateness of E&M services.
  1. Nursing Homes
  • Billing for the highest level of therapy after it may have become unnecessary or prove to be ineffective.
  • Unnecessary hospitalizations.
  1. Hospice
  • Use and suspected overuse of hospice in assisted living facilities.
  1. Durable Medical Equipment
  • Medical necessity of “scooters” and adherence to billing requirements.
  • Medical necessity of nebulizers.
  • Medical necessity of frequently replaced supplies.

Also, in light of the emphasis on detecting and recouping money where providers employed excluded persons, it is worth noting that OIG says it will look closely at home health agencies to see if they are employing persons with criminal convictions of any sort.

Inoculation and Prophylaxis

So what is a provider to do?  One thing, obviously, is to be careful not to hire excluded persons.  This means checking before hiring and periodically rechecking.  Recall that the least expensive case last year cost the provider about $2,000 and the most expensive cost $427,000.  Here, for sure, effective screening and early detection is vital.

Beyond that, revisit and evaluate your coding, billing, and choice of services.  Especially look for the outlier, the provider who does more of the expensive things than anyone else.  Likewise, look at the provider who simply generates more money than the rest, both within your organization and as compared to your peer group.  Some people who work very hard also up-code, unbundle, or bill for phantom services, so hard work may not be the full explanation for high A/R.

Of course, be concerned about unusual business arrangements, but also be sure the routine arrangements are documented correctly.  This includes rereading your contracts to be sure they are current, are signed, are for fair market value, and are not with excluded persons.  Also, be sure you are using the correct NPI numbers and be sure that template electronic medical records do not mask the actual medical necessity of services with lots of boilerplate language.

Review your actual operations

Make sure your supervisory arrangements are correct and are being followed.  Make sure only qualified people are providing the services.  Make sure your work is properly documented.


Whether or not the new work plan involves a specific matter that is a big part of your practice or services, what it clearly does is reinforce the government’s long-term trends of checking to be sure services are needed, are billed correctly, and are provided by the right people.  These things – Who, What, Why, and How Much – are the key issues behind every OIG work plan.  They were last year, and they will be in the year to come.

So, even assuming that relatively small fractions of waste, abuse and fraud are detected, recouped, and punished, can you relax? Not at all.  From the federal government’s perspective, the fact that so much goes undetected is a reason to make examples of those who seriously abuse and defraud the system whenever they are detected.