Medicare Fraud Rampant, Secret Witness Claims

Major research hospitals have routinely violated Medicare rules and jeopardized the lives of patients by using experimental medical devices in pursuit of illegal profits, a secret industry witness told a Senate hearing Wednesday.

Seated behind a screen and talking through a voice modulator, the anonymous witness said that he watched one patient die when an experimental cardiac catheter unraveled inside the patient’s heart and shredded an artery.

Medicare, the federal health insurance program for the elderly and disabled, does not cover the cost of such experimental devices as newly developed pacemakers, implantable defibrillators and cardiac catheters.

Hospital officials defended the use of the devices, saying that they were intended to give patients the benefit of the latest technological advances even if they are not yet covered by Medicare. But the witness said that manufacturers of the devices give doctors tremendous financial rewards for using the experimental technology.

Sen. William V. Roth Jr. (R-Del.), who presided over Wednesday’s hearing as chairman of the Senate Government Affairs permanent subcommittee on investigations, said his committee’s work shows that hospitals have found ways to defraud Medicare out of millions of dollars by disguising their use of experimental devices.

The secret witness, an employee of a major medical institution, said that hospitals sometimes substitute approved devices for experimental ones in their requests to Medicare for payment. For example, they might disguise an experimental cardiac catheter, which is not covered by Medicare, as an angioplasty balloon, which is covered.

In fact, the witness said he had seen doctors insert angioplasty balloons as well as catheters solely to create a paper trail for subsequent Medicare billings. The practice was cynically called a “reimbursement balloon,” he said.

“They would run the balloon up into the patient’s artery, expand it and take an X-ray for the patient file in the event of a Medicare audit,” the witness said. “A bill would then be submitted to Medicare, hiding the experimental device procedure and instead claiming reimbursement” for a Food and Drug Administration-approved angioplasty.

The witness said that he had personally seen such practices “dozens of times in dozens of places,” an assertion that left the Senate panel stunned. Sen. Carl Levin (D-Mich.) said that the practices amounted to a virtual “criminal assault” on patients.

Investigators for the Department of Health and Human Services testified that, after issuing subpoenas to 132 major hospitals, they have collected evidence that most, if not all, of them submitted improper bills for experimental medical devices and that at least half of them did so knowing it was illegal. The witness has filed a sealed whistle-blower lawsuit under the federal False Claims Act. If the suit is successful, he will get a percentage of the money.

In a separate action, it was announced Wednesday that the government has settled the first civil case stemming from the investigation, collecting $1.3 million from Sutter Hospital in Sacramento.

Sutter chief executive Patrick Fry acknowledged at the hearing that his hospital had submitted improper billings to Medicare but said it was done in the interest of patient care and that the costs for experimental devices did not exceed what the hospital would have spent for care using older technology.

The billing practices of the University of Washington Medical Center in Seattle and Allegheny General Hospital in Pittsburgh, Pa., also were called into question by Roth, who displayed blown-up copies of internal memos from the hospitals showing that they were fully aware of Medicare rules and elected to bill the agency nonetheless.

Anthony Sanzo, president of Allegheny, said that Medicare rules were unclear and that they were never promulgated correctly under federal rule-making procedures. “Superior patient care” dictated the hospital’s decision to use the devices, he said.

But the secret witness told a much different story, maintaining that hospitals and doctors respond to the potential for financial rewards. As incentives to use the devices frequently, doctors who are clinical investigators for experimental devices are often granted stock options, royalty contracts and cash by manufacturers, he said. In the end, many of the devices prove unsafe and are withdrawn from the market, he added.

Jack Hartwig, deputy inspector general at Health and Human Services, told the subcommittee that the agency is committed to recovering all the money that was improperly paid out, calling the hospitals’ practices “outrageous” in an interview after the hearing.

Nonetheless, Roth said that the department is not doing enough to stop fraud and that Medicare remains more open to fraud and abuse than any other federal program.

Hartwig said, however, that his budget for investigations has been repeatedly cut in recent years, leaving him with “greatly diminished” resources for audits, travel and other investigation costs. He has 175 criminal investigators to cover the entire Medicare program, he said.