Until recently, a psychologist in a Southeastern state had a thriving practice in geriatric psychology, working with patients in nursing homes. Then the health-insurance company that acts as the Medicare carrier for his state had his records audited.

The report of that audit said that several dozen patient records had been reviewed and all of them lacked sufficient documentation to indicate medical necessity. This "sampling" of records, according to the audit procedures Medicare uses, could represent all the work he had done in the nursing homes during that period--a methodology that APA and health-care providers in general vehemently oppose since it can lead to inappropriate assumptions and faulty conclusions.

Rather than questioning the few thousand dollars of claims represented by the files reviewed, the agency extrapolated to cover all his claims over the entire time period and said the psychologist had over billed by more than $500,000.

The FBI then moved in with a search warrant, seized all of his records, apparently for the purpose of a criminal investigation.

The psychologist now has an attorney and is appealing the Medicare agency's decision to an administrative law judge. His attorney asked that neither the psychologist nor himself be identified pending the legal proceedings. The FBI has not indicated whether a criminal prosecution is in the works.

After the audit, Medicare, his primary reimbursement source, suspended all payments to him.

The government's massive initiative against health-care fraud and abuse in this country is several years old, now a permanent structure and one that is expanding, according to sources in Congress, federal agencies and private consultants.

APA's Practice Directorate has monitored developments related to the enforcement push over several years.

"While the APA supports efforts to eliminate fraud and abuse in the current health-care system," said Russ Newman, PhD, JD, APA's executive director for practice, "we are similarly concerned that overly zealous fraud enforcement not cast an inappropriately wide net. The directorate is aware of many instances where Medicare carriers are using enforcement policies as cost-containment devices to curtail legitimate services."

Others working with practicing psychologists confirm that assessment.

"This is a freight train coming at psychologists," says James Georgoulakis, PhD, MBA, APA's representative to the Resource Value Update Committee that advises the Health Care Financing Administration (HCFA).

Virtually every week he gets a call from a psychologist under investigation. Accusations of over billing from $60,000 to $100,000--often more than a practice can sustain--are not uncommon, he says.

Up to now psychologists have not been scrutinized as intensely as hospitals and physicians, says Georgoulakis, director of healthcare, Holt Companies, San Antonio, Texas, and author of several books and articles on health-care compliance.

The bad news, he says, is they are vulnerable to future pressure that could be much greater.

"It's not that psychologists are dishonest people. It's that we are not educated on claims submission," he says.

Psychologists are getting in trouble, says Georgoulakis, with coding, indications of medical necessity, poor documentation, bills indicating too many hours for one day, and lack of knowledge of payment policies.

Enforcement actions can range from demands for reimbursement to civil penalties and, in some cases, even the possibility of imprisonment.

This month the Monitor will focus on the vast efforts to snuff out fraud and abuse in health care.

Next month we will look at how psychologists can take protective action.

An intensified push

In recent years, Congress has pumped hundreds of millions of new dollars into the health-care enforcement effort. Much of that mandated enhancement has only recently been coming to fruition.

Attorney General Janet Reno has declared combating health-care fraud and abuse the second highest priority in the U.S. Department of Justice (DOJ), preceded only by the fight against violent crime. The HCFA budget for the effort this year is over $700 million. The battle is being carried out by the "fiscal intermediaries" and "carriers" for Medicare, state Medicaid fraud units and the DOJ's U.S. attorneys' offices around the country.

And just in the last year, HCFA has expanded the avenues of attack by funding new "program safeguard contractors" to be more focused, aggressive fraud fighters than the regular Medicare carriers and fiscal intermediaries. In addition, it mandated that the federal "peer-review organizations" in every state devote more resources to claims review.

The largest part of the antifraud effort still emanates from the federal and state governments, but private insurers have their own efforts. They also coordinate with and learn from the government's efforts.

And this ever-evolving force is not likely to dissipate any time soon, since it's motivated in great part by the pressing need to contain health-care costs, as congressional hearings and agency publications indicate. Various estimates say 7 percent to 10 percent of health-care expenditures are lost to fraud or misbilling.

Hospitals have probably been hit hardest by the enforcement push and they have come to realize that it's not just providers who are intentionally cheating who feel the heat. Most hospitals in the country have had to deal with one enforcement action or another.

And apparently psychologists who are not intending to defraud anyone are getting in trouble as well. As one example, some psychologists are not documenting correctly or in the way prescribed by the local Medicare carrier or fiscal intermediary or other insurer, say Georgoulakis and others. Medical records professionals have a saying, "If it isn't documented, it didn't happen." And if it was billed to an insurance program, say enforcement agencies in legal actions around the country, it's fraud.

Assistant U.S. attorney James Sheehan, the most prominent DOJ prosecutor in health-care fraud, has frankly indicated that the enforcement push is intended not only to root out criminals, but to change health-care practitioners' mindsets through the entire industry. Rather than seeking ways to gain maximum reimbursement, practitioners should be aiming for meticulous compliance with the rules, enforcers emphasize.

Enforcement tools

And enforcement agencies are using hefty instruments to make their point. Other than criminal prosecutions, their primary weapon is the False Claims Act, which makes anyone who submits a false claim to the government liable for a civil penalty of between $5,000 and $10,000 for each claim, plus up to three times the amount of damages.

Although enforcers say these punishments will not be used for inadvertent errors, they can be used when a provider should have known the rules on claim submission or other activity.

Another technique investigators use is the "sampling process," such as the one used in the psychologist's case outlined above. An audit looks at what is intended to be a statistically valid random sample of records. If there are problems in those records, the agency extrapolates that percentage to cover the similar records for the same time frame, multiplying by many times the amount the government says was improperly billed. The amounts can be devastating, even if the enforcement agencies are not seeking penalties.

Although the health-care industry has objected strenuously to the sampling process, courts have upheld it in general, and the government investigators are using it regularly. Attorneys in health-care fraud and abuse indicate it can still be challenged in court in some instances.

The enforcement actions have come in waves, as the DOJ, HCFA and the Department of Health and Human Services Office of Inspector General (OIG) focus on one aspect of the industry or one particular practice and teach each other where the vulnerabilities are.

In terms of psychologists' individual or group practices, Georgoulakis says the distress calls he receives come from all over the country, but most are from New York, Texas, Florida, California and Washington, with some concentration in Ohio and Illinois. He warns that just like with initiatives against hospitals, enforcers will perfect their technique and use it in other regions.

In addition, there are several trends of enforcement actions on services in institutions. A focus on nursing homes is not a surprise, given the finding by the OIG that 32 percent to 46 percent of mental health services in nursing homes are unnecessary.

For example, as of December the Ohio Psychological Association (OPA) had documented 12 cases of Medicare auditors ruling that large portions of a psychologist's services to nursing home patients were undocumented or medically unnecessary. OPA has said the audits did not follow the published policy on medical necessity. The Medicare carrier has said they did.

In another thrust, over the last two years the OIG has found extensive, deliberate fraud involving Medicare's partial hospitalization program in a number of community mental health centers.

The OIG is continuing the investigation into community mental health centers and has moved to investigate partial hospitalization services in hospitals as well as hospital outpatient psychiatric services in general.

In one of the first major such investigations, last year the OIG audited outpatient psychiatric services of Franklin Medical Center of Greenfield, Mass., and found that of $20,871 from 100 random claims, $13,000 was for services not meeting Medicare criteria. From that, OIG projected the hospital owed more than $600,000 in repayments. Problems cited included documentation for group therapy that consisted only of checking off the patients' names; therapists' notes that could not be located; and no documentation of physician's order.

Sidney Rocke, JD, APA special counsel and formerly a health-care prosecutor with the OIG, points out that some psychologists are taking preventive action. Rocke has given continuing-education sessions on compliance for two state psychological associations as a service from the APA Practice Directorate.

"Knowledge is the best line of defense. And that includes psychologists knowing how their practices are vulnerable to attack from both the government and insurance companies."