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Anyone who has tangled with the health care system, even briefly, knows it to be a web of perverse incentives. Reward (payment) comes for providing services, medications, and supplies not for solving problems and meeting needs. As a result, it should hardly be a surprise when more procedures, consultations, and prescriptions become necessary over time to address a given medical issue, say a child with an asthma exacerbation or a woman with a heart attack. This is one of the principle inefficiencies that make our health care the world’s most expensive and may well play a role in keeping it from being among the world’s most effective.

When does inefficiency in health care cross the line and become out-and-out fraud? If we knew exactly the treatments that a given patient would need to be restored to their previous health, it would be easy to draw a bright line that would delineate necessary care from add-ons that bilk the system. The same gray area that obscures our understanding of disease and how best to treat it makes for uncertainty in how much care for a particular medical problem should cost. Health care providers operate in this gray area and business on both sides of the line is booming. Medicare and Medicaid fraud has been estimated at $60 billion a year, although putting a figure on it might be something like trying to put a dollar sign on the cocaine trade.

DaVita, which has a third of the country’s kidney dialysis patients, has provided us with a less-than-subtle example of Medicare fraud in action. In a whistle-blower lawsuit brought in the Atlanta US District Court, DaVita stands accused of systematically altering the interval of medication doses, ordering larger medication vials than needed for a patient’s dose, throwing out the leftover and then billing Medicare for all of the medicine. Andrew Pollack, writing in the July 25th Times, breaks down how the scheme (allegedly) worked. Dialysis patients often need treatment for anemia with an injectable iron supplement to boost red blood cell production that is depleted by kidney failure and dialysis. One injectable form of iron is Venofer (iron sucrose), which is typically given as a 100 mg injection once or twice a month. DaVita had patients receive frequent 25 mg injections of the drug, presumably once a week. The remaining 75 mg in the vial would be thrown away. Medicare would be billed for the entire 100 mg dose. By my calculation, this is a 4x mark-up. There was a similar scam for Vitamin D administration, a vitamin that dialysis patients lack because the kidney plays an important role in Vitamin D synthesis and uptake.

The lawsuit was brought by a nurse and a nephrologist working at DaVita dialysis centers in Georgia. Daniel Barbir worked at the center in Cummings, GA that was operated by Gambro until it was acquired by DaVita in 2005. He resigned the following year after his complaints about the company’s dosing protocols fell on deaf ears. Dr. Alon Vainer was the medical director at a number of Gambro and DaVita dialysis centers in Georgia. His employment contracts were not renewed by DaVita. Apparently filing the law suit was not great for his future with the company.

Although it is not an admission of guilt, DaVita has changed its prescribing protocols. It now only gives Venofer in 50mg (a new vial size) and 100mg doses and did away with the offending 25mg dose that required that medicine be wasted. This change happened to coincide not only with the lawsuit, but also with the debut of a new dialysis billing system, started in January, which reimburses a fixed sum for dialysis care instead of reimbursing for itemized goods and services (more to discuss here). DaVita’s spokesman, Bill Myers, crafted this email response to the Times explaining the timing of the change in policy, “For many reasons, treating physicians asked for a stronger clinical application tool for iron therapy and we were able to offer one contemporaneously with the new billing system”. Perfect.

Despite the fact that DaVita seemed to be running a scam (you’ve got to wonder how else they were over-billing Medicare), the federal government decided not to join the lawsuit after a two year investigation. That decision is probably the closest thing that DaVita has to a defense. Now the whistleblowers stand alone.

How can we improve a health care reimbursement system that encourages inefficiency and at its worst incentivizes fraud? With the leadership of Dr. Donald Berwick, the Centers for Medicare and Medicaid Services (CMS) have courageously fought against the powerful interests who are quite happy with the current system to replace a la carte reimbursement with an integrated system that pays a fixed amount for management of a specific medical condition. The Accountable Care Organization (ACO) model is a key part of the Affordable Care Act and its implementation is critical in making health care reform a success. ACOs work. CMS just announced encouraging results from the Physician Group Demonstration, a five year pilot study of the ACO concept. Check out Dr. Berwick on the PBS Newshour this evening (nowish), always a treat. Left on Longwood is proud to count several ACO pioneers among our friends, apologies for preaching to the choirmasters.

Today’s Dallas Morning News headline gloated over a CMS report that found conditions at Parkland Hospital to pose “an immediate and serious threat to patient health and safety.” Parkland is the venerable county hospital that provides care for Dallas’ indigent population, mostly supported by Medicare/Medicaid. The investigation was spurred by a fatal incident that occurred in the Parkland psychiatric ER (a fascinating and yes, violent, place to spend time as a medical student). Parkland must respond with a plan to address a number of deficiencies in infection control and other areas of patient care within two weeks or face losing Medicare and Medicaid funding. Of course, this would be most disastrous to the challenged population that Parkland is struggling to serve. No one wants to see funding cut (well, I shouldn’t try to speak for House Republicans). We can expect Parkland and CMS investigators to work together to make the hospital even better able to fulfill its very difficult mission.

I can’t help but wonder why the federal government is not suing DaVita in an attempt to recover federal health dollars that purchased medicine that literally was thrown into the trash. Parkland is one place where that money could do a lot of good.