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Eliminating Fraud and Doctor Conflicts of Interests

States are also stepping up to root out fraud and self-dealing by doctors and hospitals:

Creating State False Claims Acts:  New rules passed as part of the 2005 Deficit Reduction Act allows state prosecutors to recover part of the penalties assessed under the Federal Claims Act, the federal law that targets health providers which submit fraudulent medical reimbursement claims with tough penalties and triple damages.  Since $15 billion was recovered for the federal government between 1987 through 2005,  joining the states that have adopted state False Claims Act not only will help cut fraud costs but also raise new revenues.

Stopping Conflicts of Interests by Doctors: While both states and the federal government (through the so-called "Stark Laws") seek to prohibit doctors from referring Medicaid patients to facilities where they have a financial relationship, many of the laws need to be toughened to deal with emerging scams.  For example, a number of investigations have found that many medical imaging companies, in order to increase often unnecessary referrals, allow doctors to pocket the difference between the MRI fee and the higher reimbursement amount. Since the total spent in the U.S. on imaging services has reached $100 billion -- a $20 billion increase in two years -- ending the financial bribes that encourage overuse of MRI scans could yield significant savings.

Restricting Limited Service Hospitals: Referrals by doctors of Medicaid and Medicare patients to hospitals they own is generally prohibited under the law, but states are beginning to take steps, such as California SB 1907, to ban such "self-referrals" for private sector patients as well, who are increasingly being diverted to so-called "limited-service hospitals" owned by doctor-specialists.  According to recent studies, the elimination of such self-referrals lowers overall health costs for third party insurers, by preventing unneeded procedures while also preventing doctors from using inside knowledge to "cream skim" the most profitable patients.

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