WASHINGTON -- Hospital sales and billing practices may be a major target next year for federal investigators whose resources for uncovering health care fraud have been expanded.
Spending to investigate health care and Medicare fraud will almost double, and the powers of the Health and Human Services inspector general will increase as a result of health care legislation enacted in August, said Prudential Securities health care analyst Barbara Dreyfuss.
"Investors should prepare for a significant increase in the number of companies targeted for fraud investigations by the inspector general's office and the FBI," she said in a report.
Hospitals top the list in a 1997 work plan released by the inspector general's office. The plan says federal investigators may explore hospital sales to find out whether the Medicare health insurance program for the elderly is being cheated out of its share of profits.
The investigation of hospital sales comes as the industry is undergoing a massive consolidation, with big publicly traded companies such as Columbia/HCA Healthcare Corp. and Tenet Healthcare Corp. expanding.
The work plan does not name any hospitals that are under investigation, but raises the possibility that deals are being structured to reduce Medicare's share of the profits.
In addition to the cost of caring for a patient, Medicare's reimbursements to hospitals include the cost of acquiring and maintaining buildings and equipment.
Medicare also shares part of the loss from depreciation of these assets, and adjusts reimbursements to reflect a gain or loss from the sale of these assets.
"Concerns have been raised that sales are being artificially structured to report losses or to minimize profits to maximize Medicare payments at the time of sale or to minimize Medicare's recapturing of a portion of the profit," the work plan says.
The review would come as states increase their scrutiny of sales of nonprofit hospitals to for-profit companies.
"It's a new trend where everyone wants to look at these hospital sales and see if they're fair," said Tom Scully, president of the Federation of American Health Systems, the trade group representing for-profit hospitals such as Columbia/HCA. "I am not aware of a single one where anybody at Medicare could claim that somehow Medicare funds have inappropriately been utilized."
The inspector general's office has also said it will review reimbursement practices by hospitals to determine whether they are improperly billing Medicare. Investigators will also look at "how and to what extent hospital ownership of nursing facilities or home health agencies" affects decisions about the care of Medicare patients.
"Concerns have been raised about the potential conflict of interest that arises when the hospitals own the nursing facilities or home health agencies which the discharged hospital patients are referred to," the work plan says.
Home health care and skilled nursing are two of the fastest-growing segments of Medicare, and both the Republican-led Congress and the Clinton administration have pledged to slow the rising cost of the program.
These services have grown to 15 percent of overall Medicare spending today from 3.5 percent in 1986, and they are expected to cost the government $55 billion in 2002.
Medicare's payment system has encouraged hospitals to get into the skilled nursing and home health care business. The hospitals are reimbursed a flat sum based on the condition that a Medicare patient was admitted to the hospital for.
That encourages hospitals to release patients as early as possible and move them into skilled nursing or home health care, which Medicare still reimburses on a cost basis.
Investigators may also review whether Medicare is overpaying for Amgen Inc.'s drug, Epogen, which is used in patients with kidney disease to increase the production of red blood cells.
Pub Date: 12/25/96