California: Medicare auditing program halted after it finds abuses

It wasn't supposed to do that: 'Pause' declared after procedure claimed rehab hospitals wasted tens of millions on unneeded care

Medicare officials have declared a temporary "pause" in a controversial auditing program that has put a strain on dozens of California rehabilitation hospitals forced to surrender tens of millions of dollars on allegations that the care they provided elderly patients was medically unnecessary. The pause, announced in a conference call to California hospitals Wednesday by the Centers for Medicare and Medicaid Services, is expected to last at least through October, said Patricia Blaisdell, vice president of medical rehabilitation services for the California Hospital Association, who participated in the call.

The association has been the leading critic of the program and the California contractor, Atlanta-based PRG-Schultz International, because of its rejection of almost all Medicare claims involving elderly patients treated at rehabilitation hospitals after knee or hip replacement.

The decision comes as the first wave of appeals of those cases is hitting administrative law judges for the Department of Health and Human Services. The judges are reversing many, if not all, of those decisions on grounds that it is impermissible under departmental rules for the auditors to call up cases more than a year old without good cause.

Blaisdell called Wednesday's announcement "an encouraging development." "We recognize this as an effort by CMS to step back and take a breath," Blaisdell said. But Rep. Lois Capps, D-Santa Barbara, who has led the state's powerful congressional delegation in complaining vigorously about the way the audit program has been carried out by PRG-Schultz, said she will introduce legislation soon to halt the audit program before it expands nationally by 2010. "We want to put a moratorium on this whole pilot program," Capps said in an interview. "We are not going to allow it to become permanent until all the problems that appear to be developing are fixed." Capps said she expects the legislation to be ready for introduction in a few weeks. Earlier, Capps and Rep. Devin Nunes, R-Tulare, orchestrated a letter signed by three dozen of the state's House members complaining about the way the program has been handled.

The audit program was established as a test by Congress in 2002 in an effort to reduce unnecessary Medicare spending. It took effect in 2005 in three states -- California, New York and Florida, all high-cost Medicare states. But rather than being paid a fee for their work, auditors are paid commissions of between 25 percent and 30 percent of the money they collect from rejecting claims as far back as five years. In the case of PRG-Schultz, its contract permits it to keep the bounty so long as its decisions are not overturned at the first and second stages of administrative review. The reversals, however, are coming in the third stage.

Andrew House, spokesman for Nunes, said PRG-Schultz told CMS that it will relinquish its right to keep its commission on all decisions reversed on appeal. Neither PRG-Schultz nor CMS responded to questions Wednesday. During the pause, CMS will have an independent contractor review PRG-Schultz's work, House and Blaisdell said. "We don't object to audits," said Blaisdell. "What we object to is the way it's being implemented. There are no physician reviews, and there are no individual case reviews. Ultimately, they are denying cases that were appropriate, and it will cause a hardship on providers and create a lack of access for patients."

That already is happening. The Rehabilitation Institute at Santa Barbara is being acquired by Santa Barbara Cottage Hospital in part because of financial problems caused by the audits. Officials at Glendale Adventist Medical Hospital said recently they are turning away Medicare patients because of the financial risk posed by the audits.

PRG-Schultz is struggling financially in its core business operations and is looking at the California Medicare contract and the expanded program as a promising source of continuing business. But in its quarterly financial report last month, the company alluded to problems on the horizon with the federal program, citing risks associated with "changes in the political, legislative and regulatory environment." Among the investors in PRG-Schultz is Blum Capital Partners, headed by Richard Blum of San Francisco. Blum is married to Sen. Dianne Feinstein, D-Calif.

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Australia: It's BYO nurse at collapsing NSW government hospital

But some people see where the problem lies

The family of a dying man was forced to use his credit card to pay for a private nurse in a public ward at Royal North Shore Hospital because there were not enough staff to look after him. Phil Lindsay, 87, a World War II veteran, had less than a week to live when his wife became disgusted with the lack of care. She hired an agency nurse for four nights because the family did not want him left alone.

His cash-for-care story comes amid a wave of complaints about lack of staff and resources at the hospital after Jana Horska, 32, miscarried in the toilets of the emergency department this week. A former doctor at the hospital said funding was cut because "people on the North Shore had money" and could afford private health care. Also yesterday:

* Dr Simone Matousek, a registrar at Royal North Shore, said there was "no commitment to care", and she could do three to four more operations a day "if I did not have to deal with this grossly inefficient system". "Many people work shifts in the hospital and leave when their time is up, not when the patient has been properly cared for," she said. "Fire all the middle management in hospitals who have created this environment and contribute nothing and you will have plenty of hospital funding."

* The federal Health Minister, Tony Abbott, ordered his department to investigate claims the NSW Government steered public funding away from the hospital.

* The Workplace Relations Minister, Joe Hockey, demanded the NSW Government launch a judicial inquiry into the claims.

* The NSW Health Minister, Reba Meagher, was forced to announce that pregnant women attending emergency departments would be transferred to maternity units rather than wait for treatment in crowded waiting rooms.

Budget documents, seen by the Herald, show the Royal North Shore/Ryde Health Service went $18 million over budget in the previous two financial years. Despite this its budget was cut by $13 million from $359 million to $346 million for 2007-08, the Opposition health spokeswoman, Jillian Skinner, said.

Mr Lindsay's case is one of many reported to the Herald. His daughter, Christine Rijks, said he had been suffering kidney failure when he was left in the emergency department for several hours in July 2005. The former Catalina gunner was later admitted to a four-bed ward, "causing my mother and my father more stress than his inevitable death". "It was so difficult to see him waiting," Ms Rijks said yesterday. "We knew he didn't have long to live. We became too frightened to go home at night because we just didn't know if anyone was seeing to him. We hardly saw any staff during the day and we were worried sick about what would happen when we went home."

Her mother, Hilarie Lindsay, said she had been asked to wash her husband, to crush his pills and dress him each day. "It was very distressing. I know the nurses are stressed out of their minds, but I was exhausted by the end of every day because we were the ones nursing him." Mrs Lindsay said she took her husband's credit card and booked an agency nurse, who stayed with him overnight. Ms Rijks said: "My parents were both under a delusion that his war service veteran's gold card would provide the best level of health care in Australia. Of more use was the American Express Gold Card."

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