HCFA officials fear that healthcare providers will start demanding more favorable settlements of Medicare billing disputes after the disclosure of three alleged "sweetheart deals."
But the news could also shame HCFA into being tougher on providers when negotiating such disputes, some healthcare attorneys said.
The General Accounting Office, Congress' investigative arm, released a report last week alleging that HCFA gave preferential treatment to three providers that Medicare overpaid by a total of $332 million between 1983 and 1993 because of a variety of billing discrepancies.
The providers were 13-hospital New York City Health and Hospitals Corp. (NYCHHC), six-hospital Los Angeles County Department of Health Services and the Visiting Nurse Service (VNS) of New York Home Care.
Sen. Susan Collins (R-Maine), chairwoman of the Senate Permanent Subcommittee on Investigations, requested the report in May 1999.
Collins said that news of the suspect settlements-her subcommittee hearing was billed as "Did HCFA Give Favored Providers Sweetheart Deals?"-could jeopardize the chances that Congress will grant providers Medicare payment relief this year (See related story, p. 6). Collins' subcommittee is investigating the three settlements to see if any HCFA official violated the Federal Claims Collections Act, which governs how incorrect claims should be adjudicated.
"When HCFA enters into improper agreements involving millions of dollars, it undermines the efforts of those of us advocating better rates of reimbursement," said Collins, who voted to give providers more Medicare money last year.
According to the GAO, the three providers received special treatment from HCFA because it was politically advantageous for the agency and its administrator to help financially strapped health systems that serve large numbers of uninsured patients.
In 1995, the New York VNS, a not-for-profit home health agency, agreed to pay Medicare $67 million, or 68%, of the $98 million it owed. The provider didn't pay a fine.
In a written statement, the VNS said that instead of filing an administrative appeal with the Provider Reimbursement Review Board, it went straight to HCFA to resolve the dispute.
While an appeal to the board is usually the first step toward settling Medicare payment disputes, that "would have left the matter unresolved for many years," the VNS said in its statement.
NYCHHC President and Chief Executive Officer Luis Marcos, M.D., said the public hospital system had appealed to the reimbursement review board a variety of billing decisions rendered by its Medicare fiscal intermediary after HCFA had paid the system. The intermediary said NYCHHC owed $155 million, but in 1996 NYCHHC settled for $25 million, or 16% of the debt, without a fine.
L.A. County's fiscal intermediary demanded repayment of $79 million because the county lacked the necessary documentation for the services. However, in 1997, HCFA agreed to accept $28 million, or 35%, of what was owed. It appears from testimony and the GAO report that no appeal to the reimbursement review board was made.
The GAO report alleged that while serving as HCFA administrator from 1993 to 1997, Bruce Vladeck helped the New York providers obtain expedited and favorable settlements of their ongoing disputes with their respective Medicare fiscal intermediaries. Vladeck was administrator at the time the settlements were reached in 1995, 1996 and 1997.
Vladeck has strong New York connections. Before becoming HCFA administrator in 1993, he was president of the United Hospital Fund in New York.
Vladeck was also an unpaid board member of NYCHHC and was invited to serve as an unpaid board member of a not-for-profit center affiliated with the New York VNS.
Upon leaving HCFA in 1997, Vladeck took a post as professor of health policy at New York's Mount Sinai School of Medicine.
Vladeck did not speak to GAO investigators before their report was written because of a federal grand jury investigation into the VNS case, said Robert Anello, Vladeck's attorney. That grand jury investigation ended in October 1999 without any charges being filed, Anello said.
In testimony before Collins' subcommittee Vladeck denied any wrongdoing.
"I did not direct the (HCFA) staff to come up with a particular result, nor did I get involved in the reimbursement settlement negotiations," Vladeck said. "I did, however, press for timely resolution of the disputes. But to suggest that . . . I had any personal interest, as opposed to the public interest, in mind when I acted on behalf of HCFA is outrageous and untrue."
Vladeck also told the committee that HHS Secretary Donna Shalala's aides were concerned about the cases of L.A. County and NYCHHC, because they were public hospitals facing severe financial problems.
"The potential closure of facilities and cutbacks in services (to the poor) was a source of great concern to the public health community, local officials, my colleagues in the Clinton administration and me," Vladeck said.
Each of the agreements included a confidentiality clause that prohibits the disclosure of both the settlement terms and the events leading up to the settlement.
HCFA, which usually seeks the approval of its own general counsel or U.S. Justice Department attorneys for such agreements, did not do so when completing the three settlements, which were not made public until the hearing.
The VNS said in its statement that it is upset about the GAO report, calling it "inaccurate and very damaging."
Luis Marcos, M.D., president and CEO of NYCHHC, said his system's settlement "was not really a sweetheart deal at all. The appeal included 10 years (of disputed claims), involved 13 hospitals and took two years to negotiate. We asked for $350 million, and we got $130 million (in reimbursements). You divide that among 13 hospitals for 10 years, and that's really not a lot."
L.A. County officials did not return calls for comment by deadline.
At last week's hearing to discuss the GAO's findings, Jean Ohl, a reimbursement specialist in HCFA's San Francisco office, told the subcommittee that she was afraid the L.A.
County settlement would set a bad example for other providers.
Ohl told the subcommittee of a March 6, 1997, e-mail she sent to Charles Booth, who at the time was director of HCFA's office of payment policy. The settlement "sets a bad precedent, especially since the county has been a `problem child' for years and years" because it was not
following documentation guidelines, she wrote to Booth. Later that year, Booth became director of HCFA's financial services group.
HCFA said in a statement that it is cooperating with the subcommittee's investigation and has instituted its own review of the settlements. It said the agency is also putting in place "new checks and balances" to ensure that settlements are based on sound policy decisions, are not arbitrary, and comply with all applicable laws and regulations.
As a result of the measures, "it may be a lot harder to settle with HCFA than it was before," said Larry Oday, an attorney with Vinson & Elkins in Washington.