A growing number of states are using sophisticated computer programs to root out Medicaid fraud and overpayment, but doctors are furious about some approaches.

By Tanya Albert, AMNews staff. Feb. 19, 2001.

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Medicaid programs nationwide face big budget shortfalls, and a growing number of states are turning to computers to help them make sure existing money is being spent properly.

States say intelligent software helps them recover money, correct honest billing mistakes and detect fraud that would go unnoticed.

Physicians, though, are outraged at some states' tactics. They believe it's unfair to go back three to five years to look for fraud when most doctors have only a year to file Medicaid claims. They say the system is tainted when companies are paid a percentage of what they recover.

Doctors also question computer algorithms used to find billing errors. In some cases, the computer program made the error, not the doctor, they say.

States using outside contractors incorporate the computer audits' findings into letters sent to doctors that say how much the physicians owe Medicaid. These unexpected letters have angered some physicians.

Louisville, Ky., ophthalmologist Marianne Cowley, MD, received a letter saying she owes Kentucky's Medicaid program $1,065.70. A six-inch file, a lawyer and a judge still haven't resolved the problem.

"It points out the ineptitude of the government system," said Dr. Cowley, who says her court battle wasn't about the money. "It shows how out of touch the government is with the needs of patients and doctors. It's too bad they're not appreciative of our work."

About a half-dozen states already use new technology or are developing a system to detect Medicaid overbilling and fraud. Experts expect more states will create systems as software continues to improve.

Physicians in three states object

So far, automated efforts have been more controversial in some states than in others.

Doctors in Washington, Kentucky and Maine say it could push them out of Medicaid. Some feel as if they're being harassed for a service that they are providing at or below costs. But in Texas and North Carolina, doctors have been more involved in the systems' development and haven't felt the same level of frustration.

States that bought computer programs and are doing audits internally seem to encounter fewer critics than states that hired outside companies to look for overpayment and fraud.

Doctors in states where outside companies are awarded contracts to sort through the data say they feel indignation and resentment.

In Washington, doctors say they are getting letters telling them to return money without much explanation about the alleged problem. Kentucky physicians say the state and the outside company it hired weren't prepared or organized for the appeals the audit effort generated.

Maine doctors are the newest group to become concerned.

The Maine Dept. of Human Services plans to use an outside consultant to examine five years of records. The state estimates it can recover $5 million. In the same way Kentucky did, the state plans to pay the company a portion of what it recoups.

"I haven't seen an increase in Medicaid reimbursement since 1974," said Brian Jumper, MD, a pediatric urologist in Portland and president of the Maine Medical Assn. "I'm offended by the threat of an audit. They should retract it, apologize and send a thank-you letter for my service."

MMA is trying to stop the audit through legislation.

"There's a heck of a lot they can do to find $5 million," said Gordon Smith, MMA executive vice president. "It's not worth aggravating doctors who treat Medicaid patients at cost or below."

Maine's DHS defends the program. It's an effort to make sure the $1.3 billion taxpayers spend on the Medicaid program is used wisely, said spokesman David Winslow. He does not believe physicians' worries will materialize.

"The contractor is in the back office doing analysis and flagging providers who stand out," Winslow said. "But any decision-making will be done by our office. The physician will interact with the state, not the contractor."

However, seeing the experience in other states, Maine doctors are cautious.

Kentucky's Cabinet for Health Services says its effort, which used an outside consultant to sort through five years of records, was successful. The state said the audit helped find and correct honest billing errors, and expects to recover $7.3 million from 3,800 providers to whom the state sent letters last year. So far, $5.1 million has been collected.

But doctors in Kentucky don't see it as a success. They were frustrated when they received letters asking for money back for what they view as common billing practices. For example, two practices said Medicaid allowed them to use a mother's Medicaid number for a newborn because babies don't get numbers immediately. But the computer audit said it was improper.

"It was a bit of a mess for us," said Bill VonderHaar, MD, a retired family practice physician who is president of the Kentucky Medical Assn. "Several doctors who got small bills just paid them because it was cheaper than fighting it. Additional physicians dropped out of Medicaid because of it."

Washington physicians had similar experiences.

Physicians started receiving letters about overbilling and fraud last fall. About 167 of the state's 6,680 Medicaid-participating physicians received letters from the state asking for money back for billing errors. Washington contracted with an outside company, which was paid a flat fee. The contractor's computer flagged potential billing errors, but state employees made the final decisions on whether to send physicians letters, said Heidi Robbins-Brown, director of the Washington Dept. of Social and Health Services' Payment Integrity Program.

The last straw

But members of the Washington State Medical Assn. say it's an uneven playing field. The state is going back three years to recoup money, yet physicians can bill only up to one year after a service.

In some cases, the rules have changed, and it's difficult for physicians to keep track of what was allowed when they billed for the service. That makes it more difficult for physicians to fight inappropriate billing allegations, the WSMA says. The association is pursuing legislation. Meeting with the governor and other state officials hasn't produced results.

"They didn't understand how serious the problem is," said John Gollhofer, a Spokane obstetrician-gynecologist and immediate past WSMA president. "This is probably going to be the last straw for people taking Medicaid patients."

But not all state efforts to use computer programs to look for Medicaid billing problems have caused such controversy. Florida, North Carolina and Texas -- each in different stages of this process -- have met with less resistance.

In Texas, the state medical association worked closely with the Texas Health and Human Services Dept. to develop an in-house computer system.

The Texas Medical Assn. got involved to help make sure a clinically legitimate computer system was created. Also, when an honest error is caught, the state works with the doctor or other health care provider to make sure the error isn't repeated.

"It's important to detect fraud and abuse," said TMA spokeswoman Allison Griffin. "But the process should not treat physicians and other health care professionals as criminals."

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