Posted: 05/08/2013 8:19 am | Ethan Rome, Huffingtonpost
For people who were blown away to learn recently that the 11 largest global pharmaceutical companies made an astonishing $711 billion in profits over the last decade, here’s another measure of the industry’s greed: the same companies paid their chief executive officers a combined$1.57 billion in that period. Not bad work if you can get it. They achieved this thanks in part to their systematic exploitation of Medicare and an epidemic of illegal marketing activity.
According to corporate filings analyzed by Health Care for America Now (HCAN), in 2012 the drug companies’ CEOs drew total compensation of $199.2 million, two and a half times the total in 2003. In 2006, the first year of the Medicare prescription drug law, the pay of the CEOs jumped by $58.9 million from the previous year, the largest one-year increase in the decade HCAN reviewed.
Inflated Drug Prices
These huge spikes in pay coincided with eye-popping profits bolstered by a provision the pharmaceutical lobby inserted into the law to prohibit Medicare from using its unparalleled purchasing power to obtain discounts or negotiate prices with drug companies. By prohibiting Medicare to get better drug prices, the federal government is effectively subsidizing the greed of the drug makers and their CEOs. As a result, Americans pay vastly higher prices than people in other countries for identical drugs. This is ludicrous and wasteful. It hurts the government, seniors and middle-class families.
It should not be the official policy of the United States to price-gouge our people and government – a practice that’s especially offensive at a time when some in Washington are talking about cutting Medicare benefits. Simply empowering Medicare to buy drugs under the same bulk purchasing discounts used by state Medicaid programs would save the federal government billions. For example, the Medicare Drug Savings Act, introduced by Sen. Jay Rockefeller (D-WV), would save $141 billion over the next 10 years without reducing Medicare benefits. Similar measures are in President Obama’s budget proposal and the House Democratic budget plan.
Illegal and Improper Conduct on the Rise
The increases in CEO pay and drug company profits also corresponded with a surge in illegal and improper conduct by the industry. From 2003 to 2012, financial penalties paid by drug manufacturers to settle allegations of illegal marketing, price-gouging of government programs and other violations rose by more than 500 percent, according to a report issued by Public Citizen in September 2012.
In 2003, there were only nine settlements with the federal or state governments, amounting to $967 million in penalties. In 2011, federal and state government agencies reached a record 44 settlement agreements with drug makers. And by July 2012, with the year only half over, drug companies had already agreed to pay nearly $6.6 billion as part of 19 settlements with the government. Data on the second half of 2012 have not yet been compiled by Public Citizen.
Here’s the kicker: The most common drug-company violation cited by regulators and law enforcement agencies between 1991 and July 2012 was overcharging government health programs. Really? How much overcharging do they need?
Over the last decade, the drug companies racked up unprecedented penalties for criminal and civil violations. They jacked up prices for seniors and the government. They made excessive profits and gave unconscionable compensation to the CEOs in charge of this all.
End Corporate Tax Giveaways
It is obscene that any lawmakers in Washington — even the most extremist Republicans who hate civilization as we know it — are even talking about cutting benefits for seniors in the midst of what amounts to a drug industry scandal.
We shouldn’t be making any benefit cuts to Medicare, Medicaid, the Affordable Care Act or Social Security. Not now, not ever. Instead, we should make the wealthiest Americans pay their fair share in taxes and eliminate indefensible special-interest tax breaks and subsidies for big corporations like the companies that ship jobs overseas, Big Oil, and a drug industry that has made a science out of ripping off the American people.
* * * * *
HCAN’s analysis of CEO pay focused on 11 companies: Johnson & Johnson, Abbott Laboratories, Pfizer, Novartis, Eli Lilly, Roche, Merck, Bristol-Myers Squibb, Sanofi, GlaxoSmithKline and AstraZeneca. Over the 10-year period, the $1.57 billion in total compensation was split among 27 executives. The top earners in 2012 were Johnson & Johnson’s William Weldon, who took in $29.8 million, and Pfizer’s Ian Read, who received $25.6 million. By comparison, the median household income in the U.S. last year was $50,054, while half of all Medicare beneficiaries had less than $22,500 in annual income.
Click below for details on Big Pharma’s annual CEO compensation expenditures.
St. Petersburg, FL:Indian American physicians and entrepreneurs, who invested over $25 million in Dr. Akshay Desai’s Universal Health Care Group, Inc., are seething in anger after the company filed for bankruptcy. The Surat-born 55-year-old Dr. Desai, a high profile entrepreneur in Florida, who was a luminary of the Republic Party for his fundraising abilities and was closed to presidential contender Mitt Romeny, has gone underground according to report.
Dr. Desai, in an interview six months ago, had claimed: “My company is now doing business in 20 states and this year we are expecting revenue of $1.5 billion.”
The state documents portray Universal, as a company in deep financial distress and badly mismanaged. Universal Health Care executives overstated assets and submitted “misleading financial statements” to the state and a major creditor, according to state documents released on March 28 by the Office of Insurance Regulation.
After Federal Bureau of Investigation agents on March 28 raided the headquarters of Universal Health Care Group Inc, in St Petersburg, Florida, which has gone belly up and filed for bankruptcy throwing over a 1,000 employees out of work, the Department of Justice has called on the bankruptcy court to appoint a trustee for this major Medicare provider.
Guy G Gebhardt, a DOJ official and a US Trustee in Florida, in court documents filed on April 3, in the wake of the search-and-seizure warrant executed by the FBI as part of an investigation that federal laws may have been violated and criminal indictments are likely, reiterated that it was imperative that a trustee take over the reins of Universal.
He said he strongly believed there are grounds to suspect that the hierarchy of the company has committed fraud through false statements amounting to criminal conduct in its financial reporting.
The Miami investment group led by Miguel “Mike” Fernandez earlier had expressed interest in buying Universal, but backed away two days later without comment after seeing the presentation.
Universal listed its Medicare Advantage membership as 90,000, Medicaid enrollees as 64,000. About 43 percent of the HMO members in Florida are patients, who require extra care — and bring in higher premiums from Medicare — because they have diabetes, lung disease or dementia.
A chart shows the company has brought in more than $1 billion in premiums a year, most of it from Medicare. Yet, according to another chart, the company lost $61 million in 2011 and $3 million last year.
Among some of the major investors in Universal were doctors Zach Zachariah, another longtime major Republican Party fundraiser, who had ploughed in over $6 million, and Raj Gupta, who had invested over $4 million.
“He is going to pay for his mistakes because something is not right,’’ Dr. Gupta, a Fort Lauderdale physician, said. “He told me he can do whatever he wants and does not have to listen to me or any other investor.’’
Several other Indian American physicians, including Dr. Raghavendra Vijayanagar, founder and former chairman of the Indian American Republican Council, and several entrepreneurs, and even some academics had invested anywhere from $250,000 to $1 million each, and among them there was an overriding sense of deep disappointment and despondency, with one of them saying, “All the investors have been right-royally screwed.”
“Who the hell knows what he did with all the money,” one said. “Hundreds of millions of dollars and God only knows where the money went,” this investor said, adding, mockingly, “He was living larger then life, flying in private jets and talking big to Romney and all those people, and of course, nobody wants to talk to him now, and all the politicians have washed their hands of him.”
According to its Web site, Universal provided federal- funded entitlement insurance programs such as Medicare and Medicaid to nearly 200,000 customers in 19 states and had 40,000 Medicare and 60,000 Medicaid members in Florida alone, who were now in a quandary regarding the future of their health insurance.
The Tampa Bay Times reported that when the FBI agents raided the Universal headquarters on March 28, employees were ordered out and told to immediately get away from their computers.
The FBI raid was carried out during the same week that the bankruptcy court trustee had alleged “a pattern of dishonesty or gross mismanagement,” including “side deals” that benefited insiders, and had cited examples where more than $18.3 million had been transferred to a Universal subsidiary also founded by Dr. Desai and $2.2 million in “bonuses and other compensation” to company officers Desai, Patel and Ludy in addition to their salaries, also in 2012.
The trustee said that even as Universal was knee-deep in financial trouble, Desai had continued to draw a $900,000 salary and another $2.5 million or more in bonuses and other compensation in 2012.
After the FBI raid, Desai, who was easily accessible, couldn’t be reached and Zachariah, Gupta and others who had invested in Universal, said they could not reach him either and believed he had gone underground or may have left the country.
Starting in 2006, Universal’s Any, Any Any plan — members purportedly could see any doctor anywhere at any time — drew thousands of members but also complaints of false advertising, poor customer service and denied medical treatments. The company temporarily suspended enrollment, and in 2008 signed an agreement with state regulators to beef up reserves to handle the swelling volume of claims.
Over the next few years Universal continued to grow, eventually expanding to 23 states and serving 140,000 members. In 2010, it spent $9 million for a new headquarters on Central Avenue in St. Petersburg and another $750,000 for renovations.
It paid more than $500,000 for a 28th floor condo in nearby Signature Place, known for its sleek architecture and sweeping views of the waterfront. Employees joked that Universal needed the condo as temporary housing for the many executives who cycled through — the company had five chief financial officers in six years.
For the past three years, Medicare officials hammered Universal for poor quality, urging potential members to use caution before selecting it.
The first public notice that Universal was in serious financial trouble came in November when it agreed to stop selling Medicare policies in Georgia. That state’s insurance commissioner cited Universal’s net loss of $22.1 million in the first six months of the year as reason for the halt.
On Feb. 4, the Florida Office of Insurance Regulation deemed Universal nearly insolvent and accused executives of a broad pattern of financial mismanagement — including fraud and diversion of funds — under Desai’s leadership.
Two days later, Universal Health Care Group filed for bankruptcy, listing $50 million to $100 million in assets and $10 million to $50 million in liabilities. Among those to whom the company said it owes an “undetermined’’ amount: Desai and his wife, Seema.
The Tampa Bay Times also said that Desai could not be reached and that “no one answered the door at his $2.6 million bay front Snell Isle mansion. A burgundy SUV and a dark silver Audi R8 sports car sat in the driveway, but the gates to the property were closed.
1. Routine Care, Unforgettable Bills
When Sean Recchi, a 42-year-old from Lancaster, Ohio, was told last March that he had non-Hodgkin’s lymphoma, his wife Stephanie knew she had to get him to MD Anderson Cancer Center in Houston. Stephanie’s father had been treated there 10 years earlier, and she and her family credited the doctors and nurses at MD Anderson with extending his life by at least eight years.
Because Stephanie and her husband had recently started their own small technology business, they were unable to buy comprehensive health insurance. For $469 a month, or about 20% of their income, they had been able to get only a policy that covered just $2,000 per day of any hospital costs. “We don’t take that kind of discount insurance,” said the woman at MD Anderson when Stephanie called to make an appointment for Sean.
Stephanie was then told by a billing clerk that the estimated cost of Sean’s visit — just to be examined for six days so a treatment plan could be devised — would be $48,900, due in advance. Stephanie got her mother to write her a check. “You do anything you can in a situation like that,” she says. The Recchis flew to Houston, leaving Stephanie’s mother to care for their two teenage children.
About a week later, Stephanie had to ask her mother for $35,000 more so Sean could begin the treatment the doctors had decided was urgent. His condition had worsened rapidly since he had arrived in Houston. He was “sweating and shaking with chills and pains,” Stephanie recalls. “He had a large mass in his chest that was … growing. He was panicked.”
Nonetheless, Sean was held for about 90 minutes in a reception area, she says, because the hospital could not confirm that the check had cleared. Sean was allowed to see the doctor only after he advanced MD Anderson $7,500 from his credit card. The hospital says there was nothing unusual about how Sean was kept waiting. According to MD Anderson communications manager Julie Penne, “Asking for advance payment for services is a common, if unfortunate, situation that confronts hospitals all over the United States.”
CLAUDIA SUSANA FOR TIME
Diagnosed with non-Hodgkin’s lymphoma at age 42. Total cost, in advance, for Sean’s treatment plan and initial doses of chemotherapy: $83,900. Charges for blood and lab tests amounted to more than $15,000; with Medicare, they would have cost a few hundred dollars
The total cost, in advance, for Sean to get his treatment plan and initial doses of chemotherapy was $83,900.
The first of the 344 lines printed out across eight pages of his hospital bill — filled with indecipherable numerical codes and acronyms — seemed innocuous. But it set the tone for all that followed. It read, “1 ACETAMINOPHE TABS 325 MG.” The charge was only $1.50, but it was for a generic version of a Tylenol pill. You can buy 100 of them on Amazon for $1.49 even without a hospital’s purchasing power.
Dozens of midpriced items were embedded with similarly aggressive markups, like $283.00 for a “CHEST, PA AND LAT 71020.” That’s a simple chest X-ray, for which MD Anderson is routinely paid $20.44 when it treats a patient on Medicare, the government health care program for the elderly.
Every time a nurse drew blood, a “ROUTINE VENIPUNCTURE” charge of $36.00 appeared, accompanied by charges of $23 to $78 for each of a dozen or more lab analyses performed on the blood sample. In all, the charges for blood and other lab tests done on Recchi amounted to more than $15,000. Had Recchi been old enough for Medicare, MD Anderson would have been paid a few hundred dollars for all those tests. By law, Medicare’s payments approximate a hospital’s cost of providing a service, including overhead, equipment and salaries.
On the second page of the bill, the markups got bolder. Recchi was charged $13,702 for “1 RITUXIMAB INJ 660 MG.” That’s an injection of 660 mg of a cancer wonder drug called Rituxan. The average price paid by all hospitals for this dose is about $4,000, but MD Anderson probably gets a volume discount that would make its cost $3,000 to $3,500. That means the nonprofit cancer center’s paid-in-advance markup on Recchi’s lifesaving shot would be about 400%.
When I asked MD Anderson to comment on the charges on Recchi’s bill, the cancer center released a written statement that said in part, “The issues related to health care finance are complex for patients, health care providers, payers and government entities alike … MD Anderson’s clinical billing and collection practices are similar to those of other major hospitals and academic medical centers.”
The hospital’s hard-nosed approach pays off. Although it is officially a nonprofit unit of the University of Texas, MD Anderson has revenue that exceeds the cost of the world-class care it provides by so much that its operating profit for the fiscal year 2010, the most recent annual report it filed with the U.S. Department of Health and Human Services, was $531 million. That’s a profit margin of 26% on revenue of $2.05 billion, an astounding result for such a service-intensive enterprise.1
The president of MD Anderson is paid like someone running a prosperous business. Ronald DePinho’s total compensation last year was $1,845,000. That does not count outside earnings derived from a much publicized waiver he received from the university that, according to the Houston Chronicle, allows him to maintain unspecified “financial ties with his three principal pharmaceutical companies.”
DePinho’s salary is nearly triple the $674,350 paid to William Powers Jr., the president of the entire University of Texas system, of which MD Anderson is a part. This pay structure is emblematic of American medical economics and is reflected on campuses across the U.S., where the president of a hospital or hospital system associated with a university — whether it’s Texas, Stanford, Duke or Yale — is invariably paid much more than the person in charge of the university.
I got the idea for this article when I was visiting Rice University last year. As I was leaving the campus, which is just outside the central business district of Houston, I noticed a group of glass skyscrapers about a mile away lighting up the evening sky. The scene looked like Dubai. I was looking at the Texas Medical Center, a nearly 1,300-acre, 280-building complex of hospitals and related medical facilities, of which MD Anderson is the lead brand name. Medicine had obviously become a huge business. In fact, of Houston’s top 10 employers, five are hospitals, including MD Anderson with 19,000 employees; three, led by ExxonMobil with 14,000 employees, are energy companies. How did that happen, I wondered. Where’s all that money coming from? And where is it going? I have spent the past seven months trying to find out by analyzing a variety of bills from hospitals like MD Anderson, doctors, drug companies and every other player in the American health care ecosystem.
When you look behind the bills that Sean Recchi and other patients receive, you see nothing rational — no rhyme or reason — about the costs they faced in a marketplace they enter through no choice of their own. The only constant is the sticker shock for the patients who are asked to pay.
Gauze Pads: $77
Charge for each of four boxes of sterile gauze pads, as itemized in a $348,000 bill following a patient’s diagnosis of lung cancer
Yet those who work in the health care industry and those who argue over health care policy seem inured to the shock. When we debate health care policy, we seem to jump right to the issue of who should pay the bills, blowing past what should be the first question: Why exactly are the bills so high?
What are the reasons, good or bad, that cancer means a half-million- or million-dollar tab? Why should a trip to the emergency room for chest pains that turn out to be indigestion bring a bill that can exceed the cost of a semester of college? What makes a single dose of even the most wonderful wonder drug cost thousands of dollars? Why does simple lab work done during a few days in a hospital cost more than a car? And what is so different about the medical ecosystem that causes technology advances to drive bills up instead of down?
Recchi’s bill and six others examined line by line for this article offer a closeup window into what happens when powerless buyers — whether they are people like Recchi or big health-insurance companies — meet sellers in what is the ultimate seller’s market.
The result is a uniquely American gold rush for those who provide everything from wonder drugs to canes to high-tech implants to CT scans to hospital bill-coding and collection services. In hundreds of small and midsize cities across the country — from Stamford, Conn., to Marlton, N.J., to Oklahoma City — the American health care market has transformed tax-exempt “nonprofit” hospitals into the towns’ most profitable businesses and largest employers, often presided over by the regions’ most richly compensated executives. And in our largest cities, the system offers lavish paychecks even to midlevel hospital managers, like the 14 administrators at New York City’s Memorial Sloan-Kettering Cancer Center who are paid over $500,000 a year, including six who make over $1 million.
Taken as a whole, these powerful institutions and the bills they churn out dominate the nation’s economy and put demands on taxpayers to a degree unequaled anywhere else on earth. In the U.S., people spend almost 20% of the gross domestic product on health care, compared with about half that in most developed countries. Yet in every measurable way, the results our health care system produces are no better and often worse than the outcomes in those countries.
According to one of a series of exhaustive studies done by the McKinsey & Co. consulting firm, we spend more on health care than the next 10 biggest spenders combined: Japan, Germany, France, China, the U.K., Italy, Canada, Brazil, Spain and Australia. We may be shocked at the $60 billion price tag for cleaning up after Hurricane Sandy. We spent almost that much last week on health care. We spend more every year on artificial knees and hips than what Hollywood collects at the box office. We spend two or three times that much on durable medical devices like canes and wheelchairs, in part because a heavily lobbied Congress forces Medicare to pay 25% to 75% more for this equipment than it would cost at Walmart.
The Bureau of Labor Statistics projects that 10 of the 20 occupations that will grow the fastest in the U.S. by 2020 are related to health care. America’s largest city may be commonly thought of as the world’s financial-services capital, but of New York’s 18 largest private employers, eight are hospitals and four are banks. Employing all those people in the cause of curing the sick is, of course, not anything to be ashamed of. But the drag on our overall economy that comes with taxpayers, employers and consumers spending so much more than is spent in any other country for the same product is unsustainable. Health care is eating away at our economy and our treasury.
The health care industry seems to have the will and the means to keep it that way. According to the Center for Responsive Politics, the pharmaceutical and health-care-product industries, combined with organizations representing doctors, hospitals, nursing homes, health services and HMOs, have spent $5.36 billion since 1998 on lobbying in Washington. That dwarfs the $1.53 billion spent by the defense and aerospace industries and the $1.3 billion spent by oil and gas interests over the same period. That’s right: the health-care-industrial complex spends more than three times what the military-industrial complex spends in Washington.
When you crunch data compiled by McKinsey and other researchers, the big picture looks like this: We’re likely to spend $2.8 trillion this year on health care. That $2.8 trillion is likely to be $750 billion, or 27%, more than we would spend if we spent the same per capita as other developed countries, even after adjusting for the relatively high per capita income in the U.S. vs. those other countries. Of the total $2.8 trillion that will be spent on health care, about $800 billion will be paid by the federal government through the Medicare insurance program for the disabled and those 65 and older and the Medicaid program, which provides care for the poor. That $800 billion, which keeps rising far faster than inflation and the gross domestic product, is what’s driving the federal deficit. The other $2 trillion will be paid mostly by private health-insurance companies and individuals who have no insurance or who will pay some portion of the bills covered by their insurance. This is what’s increasingly burdening businesses that pay for their employees’ health insurance and forcing individuals to pay so much in out-of-pocket expenses.
1. Here and elsewhere I define operating profit as the hospital’s excess of revenue over expenses, plus the amount it lists on its tax return for depreciation of assets—because depreciation is an accounting expense, not a cash expense. John Gunn, chief operating officer of Memorial Sloan-Kettering Cancer Center, calls this the “fairest way” of judging a hospital’s financial performance
The use of electronic medical records has been central to the aim of overhauling health care in America. Advocates contend that electronic records systems will improve patient care and lower costs through better coordination of medical services, and the Obama administration is spending billions of dollars to encourage doctors and hospitals to switch to electronic records to track patient care.
But the report says Medicare, which is charged with managing the incentive program that encourages the adoption of electronic records, has failed to put in place adequate safeguards to ensure that information being provided by hospitals and doctors about their electronic records systems is accurate. To qualify for the incentive payments, doctors and hospitals must demonstrate that the systems lead to better patient care, meeting a so-called meaningful use standard by, for example, checking for harmful drug interactions.
Medicare “faces obstacles” in overseeing the electronic records incentive program “that leave the program vulnerable to paying incentives to professionals and hospitals that do not fully meet the meaningful use requirements,” the investigators concluded. The report was prepared by the Office of Inspector General for the Department of Health and Human Services, which oversees Medicare.
The investigators contrasted the looser management of the incentive program with the agency’s pledge to more closely monitor Medicare payments of medical claims. Medicare officials have indicated that the agency intends to move away from a “pay and chase” model, in which it tried to get back any money it has paid in error, to one in which it focuses on trying to avoid making unjustified payments in the first place.
Late Wednesday, a Medicare spokesman said in a statement: “Protecting taxpayer dollars is our top priority and we have implemented aggressive procedures to hold providers accountable. Making a false claim is a serious offense with serious consequences and we believe the overwhelming majority of doctors and hospitals take seriously their responsibility to honestly report their performance.”
The government’s investment in electronic records was authorized under the broader stimulus package passed in 2009. Medicare expects to spend nearly $7 billion over five years as a way of inducing doctors and hospitals to adopt and use electronic records. So far, the report said, the agency has paid 74, 317 health professionals and 1,333 hospitals. By attesting that they meet the criteria established under the program, a doctor can receive as much as $44,000 for adopting electronic records, while a hospital could be paid as much as $2 million in the first year of its adoption. The inspector general’s report follows earlier concerns among regulators and others over whether doctors and hospitals are using electronic records inappropriately to charge more for services, as reported by The New York Times last September, and is likely to fuel the debate over the government’s efforts to promote electronic records. Critics say the push for electronic records may be resulting in higher Medicare spending with little in the way of improvement in patients’ health. Thursday’s report did not address patient care.
Even those within the industry say the speed with which systems are being developed and adopted by hospitals and doctors has led to a lack of clarity over how the records should be used and concerns about their overall accuracy.
“We’ve gone from the horse and buggy to the Model T, and we don’t know the rules of the road. Now we’ve had a big car pileup,” said Lynne Thomas Gordon, the chief executive of the American Health Information Management Association, a trade group in Chicago. The association, which contends more study is needed to determine whether hospitals and doctors actually are abusing electronic records to increase their payments, says it supports more clarity.
Although there is little disagreement over the potential benefits of electronic records in reducing duplicative tests and avoiding medical errors, critics increasingly argue that the federal government has not devoted enough time or resources to making certain the money it is investing is being well spent.
House Republicans echoed these concerns in early October in a letter to Kathleen Sebelius, secretary of health and human services. Citing the Times article, they called for suspending the incentive program until concerns about standardization had been resolved. “The top House policy makers on health care are concerned that H.H.S. is squandering taxpayer dollars by asking little of providers in return for incentive payments,” said a statement issued at the same time by the Republicans, who are likely to seize on the latest inspector general report as further evidence of lax oversight. Republicans have said they will continue to monitor the program.
In her letter in response, which has not been made public, Ms. Sebelius dismissed the idea of suspending the incentive program, arguing that it “would be profoundly unfair to the hospitals and eligible professionals that have invested billions of dollars and devoted countless hours of work to purchase and install systems and educate staff.” She said Medicare was trying to determine whether electronic records had been used in any fraudulent billing but she insisted that the current efforts to certify the systems and address the concerns raised by the Republicans and others were adequate.
The report also takes to task another federal agency that certifies the software systems used to qualify for the Medicare incentive payments, saying it should do more to ensure the systems’ reports are accurate and meet the “meaningful use” criteria.
Medicare has not audited any of the $3.6 billion payments it has made to date, according to the report, which faults the agency for its lack of prepayment review and reliance on self-reporting after money has been spent.
In their written response to the report, federal officials said they agreed with some of the inspector general’s recommendations that they clarify what hospitals and doctors need to do to qualify for the payments. But Marilyn Tavenner, the acting administrator for Medicare, strongly disagreed with the idea that the agency should do more to ensure payments are appropriate before writing a check.
Requiring an audit before paying hospitals and doctors “could significantly delay payments to providers,” she said, and these reviews “would also impose an increased upfront burden on providers.” Ms. Tavenner said Medicare took some steps to make sure providers were eligible for the payments but “does not believe prepayment audit is necessary at this juncture.” Medicare maintains that it has systems in place to verify the information being submitted.
Medicare has developed plans to audit payments it has made since the program started in 2011 and says it expects to issue additional guidance for hospitals and doctors.
The other federal agency, the Office of the National Coordinator for Health Information Technology, agreed with the inspector general’s recommendations and said officials were already working to improve the process of certifying systems.
The inspector general said Medicare should be able to review at least some payments before they were made to determine whether the hospitals and doctors actually qualified. The investigators suggest identifying a small number of providers where the information provided was inconsistent and conducting a review or audit.
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