Medicare Fraud and Cost Outliers
Medicare pays doctors, hospitals and other health care providers based on fixed price formulas. The idea is to standardize costs. For example what the government pays for a simple surgery to remove a patient’s tonsils shouldn’t depend on what physician performs the surgery or in which hospital the surgery is performed. One notable exception, however, is for so-called “cost outliers”—patients who are extremely ill.
Recognizing that one size only fits most, Medicare rules allow exceptions in particularly challenging cases. For those patients, no formula or fixed fee seems to work. The Centers for Medicare and Medicaid Services permits hospitals to bill cost outliers on the actual cost of treating them.
Because hospitals typically increase prices faster than actual costs, Medicare pays more than it should for cost outliers. Theoretically, Medicare has the ability to come in audit and seek a refund after the fact but never does so. A recent Wall Street Journal investigation revealed that Medicare overpaid almost $3 billion in just 4 years because of improper cost outlier payments.
Because hospitals bill cost outliers based on the actual prices for services, there is a tendency to over treat and over bill in these special cases. The Journal quotes former Medicare administrator Tom Scully as saying, “There’s still manipulation going on.“ Scully likens Medicare’s efforts to curb these costly cost outlier payments to playing “Whack-a-Mole.”
In 2006, healthcare giant Tenet Healthcare Corp paid $800 million to settle charges that the company overbilled Medicare in cost outlier cases. In the last decade, regulators still haven’t found a reliable way to curb the problem.
Medicare auditors face a backlog of cases that is years old. With so much blatant Medicare fraud taking place, auditors don’t have the time to spend investing hundreds of hours on a single cost outlier case. That means that hospitals are literally stealing billions of our tax dollars.
While some hospitals continue to cry poverty and claim they are losing money on Medicare patients, the truth is that hospitals usually profit handsomely from cost outliers.
The best method of detecting and putting an end to hospital Medicare fraud is finding a whistleblower within the hospital. Under the federal False Claims Act, whistleblowers can receive up to 30% of whatever the government collects from wrongdoers. One look at the almost $1 billion Tenet Healthcare settlement and its easy to see that whistleblower awards can be substantial.
We have but two goals in our national whistleblower practice – help our clients put an end to Medicare fraud and get them the largest awards possible. To date our whistleblower clients have received over $100 million in award money.
Real money. Real heroes. Real results.
Have information about faulty cost outlier payments or other forms of Medicare fraud? Give us a call. Every inquiry is protected by the attorney – client privilege and kept completely confidential.
For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct).
MahanyLaw – America’s Whistleblower Lawyers