What to do amid EHR upcoding controversy

In the wake of reports suggesting that the use of electronic health record (EHR) systems promotes upcoding and cloning to boost revenue (see the October 4 issue of Healthcare Value Wire), the Obama administration issued a warning letter to hospitals. The letter, sent to five hospital associations by Health and Human Services Secretary Kathleen Sebelius and U.S. Attorney General Eric Holder, warns that such activity will not be tolerated and that there will be more investigations into “gaming” the Medicare system.

The hospital community acknowledges the trend of using better-paying codes, but says it’s because treating patients—especially elderly patients—has become more complex. Also, absent an EHR, physicians were conservative when coding, fearing an audit. The growing use of EHRs has made it easier to substantiate the proper code.

The debate—and the finger-pointing—will continue. Regardless of how this issue pans out, the last thing any hospital wants is to go through an audit over this and give back any claimed overcharges.

What to do: Be proactive by stepping up compliance efforts. Immediately issue a directive or memo reinforcing the policies and procedures about using EHRs. Review EHR policies and procedures to see where they can be beefed up. Consider these action steps to ferret out and prevent any upcoding, whether inadvertent or not:

• Conduct periodic surprise audits, including chart reviews and examining physician notes;
• Run reports to uncover any red flags, such as trends in using higher-level codes for certain types of patients (new versus existing) and payers and by certain physicians; and
• Make sure the EHR doesn’t take “thinking” out of the process (that is, the system should not automatically assign codes).

What not to do: Do not put EHR implementations on the back burner. These systems are designed to increase efficiency and eliminate waste due to unnecessary and uncoordinated care.

Also, healthcare providers that are shopping for systems should investigate vendor claims that the system will boost revenue because of the ability to substantiate higher-paying codes.

Unique case points up appraisal landmine when acquiring a physician practice

If not handled properly, the acquisition of a physician practice can lead to huge financial trouble—as one medical center recently found out.

First-ever case: HCA’s Parkridge Hospital in Chattanooga, Tenn., announced a $16.5 million settlement with the federal government and state of Tennessee over claims it violated the False Claims Act and the Stark anti-kickback statute. The complaint stated that HCA made several deals with a physician practice it acquired, providing financial benefits to encourage doctors in the practice to refer patients to HCA facilities. HCA admits to no wrongdoing in the settlement. While this case in itself is not unique, it is the first case we know of where an appraiser blew the whistle on the client.

The case originated when a real estate appraiser doing work on behalf of the hospital filed a qui tam (whistleblower) complaint alleging that Parkridge paid excessive rent to a real estate entity owned by physicians whose practice Parkridge had previously purchased. According to the complaint, the appraiser had been retained in 2008 by Parkridge to determine the fair market rent and concluded a range of $8.10 to $10.10 per usable square foot. The lease ultimately entered into had a rate of $12.59 per square foot, based upon “an erroneous fair market value study … from an unlicensed and uncertified appraiser” to provide sufficient rental income for the physicians to satisfy bank loan payments on the property.

The total rent based on the 29,204 square feet leased would have been approximately $367,000 per year; for four years, it would have been $1,468,000. The excess rent based upon the high end of the whistleblowing appraiser’s range would have been $2.49 per square foot, or $73,000 per year; for four years, it would have been $300,000.

The whistleblower received $3.1 million out of the settlement payment.

Ongoing crackdown: “Improper business deals between hospitals and physicians jeopardize both patient care and federal program dollars,” said Daniel R. Levinson, the inspector general of the Health and Human Services Department, in a news release. “Our investigators continue to work shoulder to shoulder with other law enforcement authorities to stop schemes that imperil scarce health care resources.”

This case is part of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, a partnership between the Department of Justice and the Department of Health and Human Services. As in this case, the most powerful tool has been the False Claims Act, which the Justice Department has used to recover more than $13.1 billion.

What to do: To help bulletproof a transaction with physicians or the acquisition of a practice, you need qualified appraisals and opinions of outside financial experts and legal counsel to back up the deal. You need an appraisal of the practice acquisition by a licensed, qualified appraiser. You also need an opinion and appraisal value of the physician compensation arrangements that arise out of the acquisition.

HCA should have refuted the rental appraisal and tried to convince the appraiser that the valuation was too low. Possibly, a compromise could have been reached, and the hospital could have avoided the harsh result.

Also, once a deal is in place, it needs to be monitored regularly to make sure things stay on track. For example, compensation or lease agreements can expire, so they need to be renegotiated in a way that they remain in compliance. This may mean another round of appraisals or opinions from financial professionals or legal counsel.

Survey reveals outlook for key growth op in wellness services

Growth is a lynchpin of organizational value. The healthcare industry has been cashing in on the increased demand for wellness, preventative care, and other interventional services. The demand outlook for these services among employers and their employees looks to be very robust, a new survey reveals.

New survey: Employers are ramping up efforts to promote wellness among their employees, according to a new survey from Aon Hewitt. Why? With healthcare costs escalating at 8% to 9% per year—and no relief in sight—they realize that the only chance to cut costs is to have healthier employees. They’re so serious about this that they will boost ways to tie managers’ and employees’ performance goals to wellness success. Let’s face it: Cash talks. For employers, the cost for lifestyle changes that lead to positive results is cheaper than rising medical costs.

In key findings from the 2012 Health Care Survey, 70% of employers say that wellness and health improvement are part of their current strategy, and the same percentage says that they want to increase member utilization of wellness programs. What’s more, 61% say they will offer incentives (and disincentives) to motivate employees to change their ways about their health. They realize that this new approach has a direct impact on their company’s bottom line through reduced absenteeism and, as a result, increased productivity. But they need actionable information and local resources.

Opportunity knocking louder: Hospitals, clinics, and groups of physicians should continue to investigate ways to help people maintain better health. Separate wellness facilities to help patients with the most common major health risks—poor dietary regimens, physical inactivity, smoking, and lack of health screening—can become new profit centers. Reach out to local businesses with information and resources, partnering with them to create a culture of health within their organizations and driving their employees into these facilities. Of course, with this shift under way, fewer patients will be landing in the ER or in the hospital for procedures and extended stays.

Keep in mind, though, that there is good growth and bad growth. Don’t simply use the “if you build it, they will come” approach. That’s too risky. Use traditional market research tactics to determine what kinds of services to focus on as part of your new wellness offerings. This can be done as part of your outreach efforts with local employers.

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