AI and Audits

Medicare audits growing rapidly. Artificial intelligence is being used to replace medical judgment. Cost of audits dropping rapidly. Health care providers forced to allocate ever-increasing amount of resources to audits.


Edward M. Roche, Ph.D., J.D. — Barraclough NY LLC

Part III — Artificial Intelligence and the Audit-Free Future

In Part I of this series, we discussed the exploding number of Medicare claims and the inability of the current appeals regime to handle the workload.  We also reviewed how special computer algorithms are being used to down-code Diagnosis-Related Group (DRG) claims, and argued that these actions are not really “audits” because artificial intelligence (AI) algorithms using statistical comparison are being substituted for medical judgment.

In Part II we examined the emerging arguments being made in “algorithm law”, but suggested that this area of litigation will need to be developed further, and the type of experts needed in the appeals hearings will change dramatically, because they will need to be familiar with artificial intelligence (AI).

In this closing part of the series, we will examine scenarios for the future. But in looking at the future, we must make a few reasonable assumptions.

The number of audits will continue to increase, and one reason for this is that due to automation the cost of audits is dropping rapidly.
The ability of the appeals system (re-determination; reconsideration; Administrative Law Judge; Medicare Appeals Council) will remain under pressure to handle the litigation workload.

The quality of audits, which most agree is very poor, will not improve, primarily because there is no incentive for the RACs do do so.

Health care providers will be forced to allocate an ever-increasing amount of their already scarce resources to dealing with audits.

Given these assumptions, there are a number of scenarios that seem reasonable ten to fifteen years hence.

Future Scenario One

More of the same. The system will continue as it is, but will simply become worse for the health care provider. The burden of audits (uncertainty, claw-backs and litigation expenses) will continue to grow. Health care will become a sector that few will wish to enter into as a career. More providers will become bankrupt.

Future Scenario Two

Change in appeals procedures. CMS already recognizes the backlog problem in appeals and has started to take action. In these proposals, there is little discussion aimed at re-thinking the overall auditing process. The primary change is in improving the capacity of CMS to handle the litigation.

There are many variations of Scenarios One and Two. But lets take a look at the future using an “out of the box” approach.

Future “Out of the Box” Scenario Three

In this scenario, algorithms using artificial intelligence continue to be used, but the provider’s medical information system will be designed to intervene before the claims billing stage. Here is the logic: If it is possible to find a different coding solution looking backwards, as current auditing approaches now do, then it should be possible to apply the same algorithms to prevent bad claims from being filed in the first place.

The optimum solution would be to replace the auditing system, and instead insert the artificial intelligence algorithms between the health care provider and the government.  Instead of being brought in after the fact, these algorithms will be injected into the space between the provider and the claims system beforehand. (See Figure) The AI system would simply stand as a front end for claims processing. It would correct deficient claims and prompt for additional information as needed.


The standing algorithm could be standardized across the United States, and as we know, today’s technology allows constant updating to the algorithm software, much like computer security updates today are pushed out from vendors.

And what would happen to the RACs? We don’t want these poor people to lose their jobs. They would transition into working for the health care providers and operating the algorithm engines. In so doing, they would focus on making sure that the AI reflects sound medical judgment, and not merely the desire to extract as much money as possible out of the hide of the provider, which is the case now.

This would eliminate the need for auditing altogether, and end this scourge of litigation and chaos that sits on the shoulders of the provider. Perhaps this type of solution might be considered by public policy makers and perhaps CMS needs to think about a more intensive R&D program. Carpe Diem — the future is there for the taking.

Note: Prior to entering law, Dr. Roche served as the Chief Research Officer of the Research Board (Gartner Group), and Chief Scientist of the Concours Group, both leading IT consulting and research organizations.

This article was originally published in RACmonitor.





Tyranny of Algorithms


Edward M. Roche, Ph.D.,J.D. — Barraclough NY LLC

Part II — Defending Against the Tyranny of Algorithms

In Part I of this series, we reviewed how the number of Medicare audits has increased by almost 1,000% in the past five (5) years, and how virtually no decisions by ALJs are being handed back within the statutory time frame.

We discussed also how RACs have started to rely on big data mining of hospital claims to generate large numbers of Diagnosis-Related Group (DRG) downgrades. This is costing hospitals plenty, not only in the reduction in payment revenue, but also in the constantly increasing cost of defending against audits.

The use of computer algorithms has drastically reduced the cost of conducting audits, but there has been no corresponding reduction in defensive costs for hospitals, and this is an example of what military people call “asymmetric warfare”, where the cost of defense is always disproportionately greater than the cost of offense. It is an impossible game to win.

We will now examine a few of the legal issues that are presented by the need to defend against not an audit, but against an algorithm.

The MPIM specifies that the decision to conduct an audit is “not reviewable” in a hearing. This means that even if a provider is being profiled or targeted through an artificial intelligence algorithm, they are fair game, no matter what the reason.

This lack of review-ability does not extend to the review itself. That is handled by the appeal system. The typical appeal has little success in the first two levels — reconsideration, redetermination — so the grass gets mowed with the Administrative Law Judge (ALJ). Appeals generally are based on a claim-by-claim argument regarding each patient or procedure, combined with a refutation of the statistical extrapolation, which is almost always based on shoddy work.

This litigation profile will change. Why? Rather than challenging the expertise or judgment of the audit reviewer who rejected a claim, the argument instead will be aimed at dis-crediting the algorithm responsible for the claim rejection.

But since these algorithms do not make decisions based on medical logic, but only on a pattern of statistical probabilities, the arguments against them will by necessity be couched in quasi-mathematical terms. To do so will require resort to an entirely different type of expert, and understanding of what we might call “algorithm law”. Yet, for the most part, many of today’s health law attorneys are ill-prepared to litigate this type of case.

This article appeared also in RACmonitor.

DRG Downcoding


Edward M. Roche, Ph.D.,J.D. — Barraclough NY LLC

Part I – DRG Downcoding in Hospitals

The number of Medicare audits is increasing. In the last 5 years, audits have grown by 936%.  As reported previously in RACmonitor, this increase is overwhelming the appeals system. Less than three percent (3%) of appeal decisions are given on time within the statutory framework.

It is peculiar that the number of audits has grown rapidly, but without a corresponding growth in the number of employees for RACs. How can this be? Have the RAC workers become more than 900% more efficient? Well, in a way they have. They have learned to harness the power of Big Data.

Since 1986, the world’s ability to store digital data has grown from 0.02 exabytes to 500 exabytes today. An exabyte is one quintillion bytes or 10e+18 bytes. Every day the equivalent 30,000 Library of Congresses is put into storage. Lots of data.

Auditing by RACs has morphed into using computerized techniques to pick targets for audits. An entire industry has grown up that specializes in processing Medicare claims data and finding “sweet spots” on which the RACs may focus their attention. In a recent audit, the provider was told that a “Focused Provider Analysis Report” had been obtained from a subcontractor. Based on that report, the auditor was able to target the provider.

A number of hospitals have been hit with a slew of Diagnosis-Related Group (DRG) downgrades from Internal Hospital RAC Teams camping out in their offices, continually combing through their claims data. DRG is a system that classifies any inpatient stay into groups for purposes of payment.

The question then becomes: How is this work done? How is so much data analyzed? Obviously these audits are not manual. They are Cyber Audits. But how?

An examination of patent data begins to shed light on the answer. For example, Optum, Inc. of Minnesota (associated with United Healthcare) has applied for a patent on “Computer implemented systems and methods of health care claim analysis.” (Application Number 14/449,461, Feb. 5, 2015) These are complex processes, but what they do is analyze claims based on a Diagnosis-Related Group (DRG).

The information system envisaged in this patent appears to be specifically designed to downgrade codes. It works by running a simulation that switches out billed codes with cheaper codes, and then measures if the resulting code configuration is within the statistical range averaged from other claims.

If it is, then the DRG can be down-coded so that the revenue for the hospital correspondingly is reduced. This same algorithm can be applied to hundreds of thousands of claims in only minutes.  And the same algorithm can be adjusted to work with different DRGs. This is only one of many patents in this area.

When this happens, the hospital may face many thousands of down-graded claims.  If it doesn’t like it, then it must appeal.

Medicare Audits as Asymmetric “Warfare”

Here, there is a severe danger for the hospital.  The problem is that the cost of the RAC running the audit is thousands of time less expensive that what the hospital must spend to refute the DRG coding downgrade.

This is the nature of asymmetric warfare.  In military terms, the cost of your enemy’s offense is always much smaller than the cost of your defense. That is why guerrilla warfare is successful against nation states. That is why the Soviet Union and United States decided to stop building Anti-Ballistic Missile (ABM) systems — the cost of defense is disproportionately greater than the cost of offense.

Hospitals face the same problem. Their claims data files are a giant forest in which these big data algorithms can wander around down-coding and picking up a substantial revenue stream for the auditor.

By using Artificial Intelligence (advanced statistical) methods of reviewing Medicare claims, the RACs can bombard hospitals with so many DRG downgrades (or other claim rejections) that it quickly will overwhelm the provider’s defenses.

We should note that the use of these algorithms is not really an “audit”.  It is a statistical analysis, but not done by any doctor or health care professional. The algorithm could just as well be counting how many bags of potato chips are sold with cans of beer. It doesn’t care.

If the patient is not an average patient, and the disease is not an average disease, and the treatment is not an average treatment, and if everything else is not “average”, then the algorithm will try to throw out the claim for the hospital to defend. This has everything to do with statistics and correlation of variables and very little to do with understanding whether the patient was treated properly.

And that is the essence of the problem with Big Data audits. They are not what they say they are because they substitute mathematical algorithms for medical judgment.

In Part II we will examine the changing appeals landscape and what Big Data will mean for defense against these audits. In Part III we will look at future scenarios for the auditing industry and the corresponding Public Policy agenda that will face lawmakers.

Originally published in RACmonitor.

Medicare and Medicaid Abbreviations

A number of abbreviations are useful to know to read 42 CFR Parts 401, 405, 422, 423 and 478.

Act – The Social Security Act

ALJ – Administrative Law Judge

APA – Administrative Procedures Act

BIPA – Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (Pub. L. 106-554)

CMS – Centers for Medicare & Medicaid Services

Council – Medicare Appeals Council

DAB – Departmental Appeals Board

HHS – U.S. Department of Health and Human Services

IRE – Independent Review Entity

IRMAA – Income Related Monthly Adjustment Amount

MA – Medicare Advantage

MAO – Medicare Advantage Organization

MMA – Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (pub. L. 108-173)

OIG – HHS Office of Inspector General

OMHA – Office of Medicare Hearings and Appeals

QIC – Qualified Independent Contractor

QIO – Quality Improvement Organization

SSA – Social Security Administration


Medicare Appeals System Crashing

A new report(*) by the U.S. Government Accountability Office (GAO), shows that the Medicare Appeals system is crashing because the number of appeals filed exceeds the capacity of the Administrative Law system.  The number of cases filed has exploded, but there has been inadequate improvement in capacity.

Levels of Appeals

There are four levels of appeals.

Level 1 – Medicare Administrative Contractors (MACs)

Level 2 – Qualified Independent contractors (QICs)

Level 3 – Administrative Law Judges (ALJs)

Level 4 – Medicare Appeals Council (MAC)

Number Appeals Rising

For the period 2010 -2014, there has been a substantial growth in appeals.  Here is the data:

Level 1     +62%

Level 2    +238%

Level 3    +936% <— look at that number!

Level 4    +267%

The greatest increase in appeals has taken place in that place where the appeal is the most complicated: Appeals to Administrative Law Judges (ALJs) increased by almost 1,000 percent.

This data indicates that providers increasing are dis-satisfied with the results of their audit. They are more likely to appeal. Also, they are considerably less satisfied with the decisions of the QICs.

So this places an incredible burden at the ALJ level. The +936% increase at Level 3 (ALJ) represents a change from 41,733 appeals in 2010 to 432,534 appeals filed in 2014.

ALJ Time/Appeal

An Administrative Law Judge (ALJ) gets the same benefits as other Federal Employees. Each year they get 26 vacation days, and 10 holidays. This leaves 329 working days per year for them to do their work.

The maximum number of cases recommended per month for an ALJ is 60, but the average is much lower.

At 60 hearings/month, taking into account the number of holidays, that is approximately 2.2 hearings per day for an ALJ.

There are 77 ALJs and this should lead to a total of 168 hearings/day; and 55,474 hearings/year.

If the number of appeals has risen to 432,534 hearings per year, and each gets a hearing, and the ALJs are working at the unrealistic maximum rate of 60 hearings per month, then in order to meet this new load, a minimum of 599 ALJs need to be on the job.

That is ten times the number of ALJs needed.

But this number assumes a sustained rate of 60 hearings per month, and that is unrealistic.  A better number is 45 hearings per month.

If this number is used, then 821 ALJs are needed, based only only the 2014 data, which already is obsolete, as the number is increasing.



(*) See U.S. Government Accountability Office, Medicare Fee-for-Service: Opportunities Remain to Improve Appeals Process, May, 2016, 88 pps., Document number GAO-16-366.

Extrapolate to Calculate Overpayments

This article concerns the use of self-audits. –Ed.

Written by Marla Durben Hirsch

If practices uncover large or systemic billing problems that led them to receive overpayments, they should conduct statistical sampling to quantify the total potential amount of overpayments received.

Doing so will reduce the time and resources some practices will need to spend dealing with overpayments in the wake of the final rule HHS released Feb. 11 (MPCA 3/16). Practices that conduct statistical sampling won’t have to review every claim that may have been overpaid, says attorney Ross Burris with Polsinelli in Atlanta.

Statistical sampling — also known as extrapolation — can be particularly helpful when complying with the rule because failing to meet the deadline to return overpayments is a violation of the False Claims Act. Penalties currently include fines of $5,500-$11,000 per claim, treble damages (damages times three) and/or exclusion from the Medicare and Medicaid programs.

The Accountable Care Act requires overpayments to be returned within 60 days of being identified. The rule clarifies how providers go about doing so.

Now that HHS issued the rule, providers are likely to see an increase in enforcement of the requirement that overpayments must be returned, Burris says.

Industry experts didn’t want to speculate on what percentage of providers might be receiving overpayments and might fall into the category of having large or systemic billing problems. However, all types of providers have at least some overpayments — many of which occur without bad intent.

Statistical sampling is a methodology to apply the rate of billing errors found in a sample of claims to a similar total population of claims. It is frequently used by the HHS Office of Inspector General (OIG), the Department of Justice, zone program integrity contractors (ZPICs), recovery audit contractors and other auditors to calculate providers’ overpayments.

The final rule specifically allows providers to use extrapolation proactively to quantify the amount to be returned, using “sound and accepted principles” that include randomly selecting claims from the applicable population of similar claims and extrapolating only within the time frame covered by the population from which the sample was drawn.

Statistical sampling is very accurate if performed correctly, experts contend.

How to apply statistical sampling

To determine whether your practice should use statistical sampling, first conduct a probe sample or audit. Do so after you receive credible information that there may have been an overpayment.

You’ll probably need to tailor the audit, say to particular years or a particular identified coding issue, Burris says.

If the probe audit reveals a larger, more systemic problem, extrapolation may be appropriate. Several decisions need to be made, in large part depending on the circumstances.

Most overpayments merely involve billing errors — say by a new coding employee — and will be returned to your Medicare administrative contactor (MAC). In these cases, you typically can (but don’t have to) conduct your own extrapolation following CMS’ program integrity manual section 8.4, which outlines what CMS is looking for in extrapolation and using a statistical sampling tool.

One of the most popular statistical sampling tools for this purpose is called RAT-STATS, which was created by the OIG and is available free on its website along with an instruction guide.

“It’s pretty easy to use and you don’t need to be a statistician,” says Gary Keilty with FTI consulting in Washington, D.C. RAT-STATS even allows users to utilize different “confidence” levels (the degree of certainty that the sample correctly depicts the total population) and “precision” levels (the estimated range of accuracy) percentages, he adds.

CMS accepts RAT-STATS as a statistical sampling tool for extrapolation calculation purposes, although its use is not required and a MAC may not have a preferred method.

Once your calculation is complete, go to the refund form from the MAC and submit the overpayment, Burris says.

“Most of the time the MAC will simply say ‘Thank you,’ and that’s the end of it,” he says.

If you’ve uncovered more than a simple error, the fraud and abuse or Stark laws(*) may be implicated. If the government is already involved, you’ll need more manpower and will want to engage an experienced attorney to handle the issue, including hiring an expert statistician, determining which government entity is involved to return the overpayment to (and what else that may involve), what the statistical sampling will entail and how best to approach the government.

Often the provider representative and the government will agree to negotiate smaller claims populations or timeframes subject to extrapolation, look at the sample together or use a statistician to provide a report, and then the parties come to a settlement based on those discussions, Burris says.

Using an attorney also will keep your investigation protected under attorney-client privilege, Keilty says.

It’s important to identify which government agency is involved, since different agencies prefer different methods of statistical sampling. For example, the OIG, which handles repayments under its self-disclosure protocol for issues involving the antikickback statute, prefers extrapolation using a 90% confidence level and a 25% precision level, Keilty says.

Consider 6 extrapolation tips

1. Don’t automatically assume that a discovered error requires extrapolation. A small error involving one or a few claims does not rise to a systemic issue that lends itself to extrapolation, Burris says.

2. If you’re handling your own extrapolation, make sure it’s a method the government accepts. This includes utilizing RAT-STATS as a statistical sampling tool and utilizing preferred confidence and precision levels. If you hire an outside statistician, ask what method he/she uses and whether the government finds that method acceptable. The government may be more likely to challenge your sampling — and overpayment amount — if it’s less accepting of the method being used.

3. Make sure you choose the right type of sample and sample size. For example, the sample needs to be randomly generated. RAT-STATS and even Microsoft Excel contain random generators, Keilty says.

4. Be careful about what you’re including in the extrapolation. For example, extrapolation assumes the total population it’s being applied to is very similar. If it isn’t, you may be including too many claims and triggering a higher overpayment than you should be repaying.

5. Note that if you use extrapolation, you don’t need to make two repayments — one for the errors uncovered during the probe audit and another covering the extrapolated amount. You can include them in just one payment, Burris says.

6. Include documentation explaining how the extrapolation was conducted and what method was used. The final 60-day overpayment rule requires this information be included when reporting and returning the overpayment, Burris says.


(*) Stark Law: 42 U.S.C. § 1395nn – Limitation on certain physician referrals.

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Original Title: “Save time and money — extrapolate to calculate overpayments”

New OIG Audits Coming

The Office of the Inspector General (OIG) of the U.S. Department of Health & Human Services (HHS) just released summary data for 2015. It was a busy year. There were 4,112 exclusions, 925 criminal actions, and 682 civil actions for matters such as false claims and civil monetary penalties.

Of particular interest to healthcare providers is the growth in the number of exclusions. RACmonitor took a look back at the historical record. Between 1977 to around 1982, there were only a handful of exclusions. But they have grown rapidly since. By 1991, OIG was excluding 1,000 providers per year. By 2001, that number had risen to around 2,800 per year. By the end of 2015, the OIG was running at an exclusion rate of around 3,800 per year, a little more than 15 providers per day.

One would assume that eventually this growth in exclusions will taper off, but for the time being, there seems to be nothing standing in the way of the trend continuing.

The OIG currently is branching out in several new directions. One important new effort is aimed at combating the growing heroin and prescription opioid crisis sweeping across the United States. Data from the Centers for Disease Control and Prevention (CDC) indicates that fatal overdoses from heroin have risen by more than 325 percent, and the addiction rate now is more than 2 per 1,000 persons. That adds up to 640,000 addicts across the country for heroin alone. There also is a severe problem with prescription opioids. From 1999 to 2010, they caused more than five times the number of deaths than cocaine and heroin overdoses combined. More than 82 percent of prescription opioid overdose deaths were unintentional. As a result, HHS has declared that prescription opioid overdose deaths constitute an epidemic.

To crack down on the overuse of opioid prescriptions, the OIG is joining a coalition including the FBI, DEA, and various state agencies. A pilot project is being launched in Massachusetts. The focus is going to be on prescriptions for hydrocodone, oxycodone, morphine, and codeine. The OIG already has prosecuted a number of cases in which providers take cash and blindly write prescriptions. It is going to increase audits in this area.

Although originally tasked with combating fraud and abuse in federal healthcare programs, we now will see the OIG assisting more actively in criminal prosecutions and coordinating more closely with state authorities. In other words, inspection and auditing powers are being used for social engineering. That’s a new role for the OIG.

The OIG also is sharpening its focus in other areas.

For example, in response to chronic problems in long-term care, the agency is pushing to set up a system of national background checks for all facility employees. This is based on section 6201 of the Patient Protection and Affordable Care Act. Long-term care facilities and providers in participating states must conduct state and national background checks on prospective employees, including a check of state abuse and neglect registries, state criminal history records, and national fingerprint-based criminal history records. For the time being, interested states can apply for participation and get matching federal funds for the work. The long-term goal is to have a nationwide program put into place.

Based on Section 502 of the Medicare Access and CHIP (Child Health Insurance Program) Reauthorization Act (MACRA) of 2015, the OIG has been directed “to establish procedures to ensure that Medicare payments are not furnished to … individuals not lawfully present in the United States.” It is foreseeable that providers eventually may be required to verify the immigration or nationality status of some individuals. It is unclear how this is going to be implemented, as are the penalties that will be assessed if the provider makes a mistake. What will happen in so-called sanctuary cities?  This part of the Act also applies to incarcerated or deceased individuals. Since every law has its genesis in the real world, we can assume that there is a major problem of Medicare payments being made to dead people.

The OIG also is planning on getting much more involved in how states finance and run their healthcare programs. Many states finance some of their Medicaid spending by imposing taxes on healthcare providers. But there are federal rules (42 CFR §§ 433.55 & 433.68) that control the extent of state power in this area, and the rules must be followed for a state to continue taking advantage of medical assistance programs. These taxes must be broad-based and uniformly imposed. Another federal-state issue is how to run state Medicaid fraud control units. OIG is auditing these state units for compliance with federal regulations and policy. So this means that the OIG is auditing the states themselves and enforcing compliance with federal law. Look for some fireworks in these areas.

On another front, OIG’s Office of the National Coordinator for Health Information Technology will be taking a crack at the problem of inter-operability of health-related information systems. Auditing is focusing on whether provider information systems meet the standards for electronic health records. So apart from a provider getting its claims audited, now the specific format of computer-stored meta data concerning claims will be a new target.

My guess is that much of this auditing work eventually will be done by artificial intelligence that endlessly searches for problems throughout your information systems.

This post originally appeared in RACmonitor on February 15, 2016

Suicide, Starvation Drugs Alcohol

This blog is a written by Herbert O’Yardley.  We present it here because it is interesting reading, but it contains controversial views on the healthcare situation in the United States.

By Herbert O. Yardley, Guest contributor.


I always like to start my commentaries with a warning. It’s always the same thing…..”I would NOT read this if I were You”. And there’s always the same Good reason (or so I like to tell myself). I’m usually Right; or at least Right enough to leave you with that sinking feeling somewhere inside. And, after writing all sorts of things over 3-4 decades, I have developed a style which is beguiling and (potentially) entertaining, but unfortunately plants the seeds that tend to sprout over time to the “discomfiture” of the reader. (As in waking up in the middle of the night in a cold sweat with heart palpitations.) (But I’m sure we’re all used to that by now…..) So, don’t blame Roche for anything in here. In fact. he may be the answer to your problem. (At least if you’re a doctor being hounded by the Feds for doing whatever you do.)

Let’s just say it up front……It sucks getting Old. We’re all going to Die. No arguments, doubts or prayers are going to change that. This leads to 2 major conclusions: (unfortunately, my B.S. is in Math, so I tend to think that way….) 1) You better do whatever it is you want to do RIGHT NOW……because there is no Tomorrow; and 2) If you have any desire, idea or opportunity to make things better, YOU BETTER GET MOVING….because there is no Tomorrow (unless you consider being a vegetable on life-support, sucking the financial lifeblood out of your insurance company or government as an acceptable alternative)…..( which I guess most people do).

And that explains (to a limited extent) the title of this piece. Oh Yeah. Did I mention that I’m over 60, have no Health Insurance, and haven’t been to a Doctor in over 40 years? So clearly, “Healthcare” is not a big priority – at least not in the common sense of the word. I’m dead already.


It all started a very long time age, but I only have detailed knowledge from maybe the Late Middle Ages when the nascent Global Economy began to take shape. Of course in our time there is always the (in-) famous calculation by a respected global institution which concluded that since the “Potential Economic Life-Value” (and that is my term) of a person in the Third World is significantly less than that of one in the First or Second, it makes (“Economic”) sense to dump nuclear and other industrial wastes and perform possibly life-threatening activities in those less developed regions. Although this is just the “MBA mentality” run a muck, look around… is everything. (Thank you Ivy League.) Once you start putting a numerical value on human life, those who produce more or have a greater “economic potential” are necessarily more valuable to Society and should be given better treatment to extend their lives as long as possible – provided of course they remain productive. The major problem with this logic is that it is extremely difficult to judge the true (economic or other) value of an individual, particularly in the early stages of life.

As repugnant as this approach may be, it does have a certain steeled, Malthusian logic which most people can understand even as they reject it. What is not so easy to understand, is the current numeric calculus – performed by Doctors and the Healthcare Industry – which matches treatment options to the potential paying power of the patient or his Insurance Company. This sentence goes a long way toward explaining why the Government declined to provide Americans with Universal Healthcare or Insurance, since publicly financed Healthcare would allow doctors and hospitals to spend virtually unlimited funds keeping people alive.But the reality is clear; Healthcare, like almost everything else, is a limited resources, and as such some means must be developed to “ration” it. The system simply cannot provide everyone with unlimited access to the latest, most expensive treatments or drugs (at least not given its present structure), and as a result some individuals – perhaps even the majority – will always be under-served.

But it’s too late to turn back now. The geniuses at Harvard and similar institutions have decided that Healthcare is the “Economic Engine” of the future. And Why not? America (and the rest of the First World) is getting older. We’ve abused or bodies with (over-) work – and play, drugs and alcohol and hyper-competition, and destroyed our minds with CNBC, Fox News and (more than likely) Internet Porn. Every day 3750 Baby Boomers turn 65 – or whatever the real number is. Tell me this is not a “No-Brainer” for the Industry of Tomorrow? And, with good Healthcare, we should all live to be 100, requiring even more Healthcare, Medical Insurance and (untested and unreliable) Pharmaceuticals. Suicide is looking better and better.


The title of this piece refers to the options available to those “economically un-viable”, often elderly individuals who no longer contribute to Society – at least in monetary terms. The formula was perfected during the “Velvet” Revolutions which followed the disintegration of the Soviet Union and the fall of the Berlin Wall in the late 1980s. An interesting phenomenon – unparalleled in Modern History – accompanied these event.  Life expectancies began to decline – and decline rapidly – in the effected areas as Global (Radical) Capitalism replaced “outdated” Communist/Socialist Economic and Social institutions and values. The reason of course was that older individuals – often retired and on a fixed pension – and those unable to generate income in new – often highly inflated – monetary units were literally forced into starvation and death. (At least younger females could always become Prostitutes or Mail-Order Brides.)

In addition to mounting economic pressures, the psychological effects of the overnight change in Social and Economic values took a heavy toll on those who spent their lives believing (or at least pretending to believe) in the former structures. At least the good news is that the 3 options form a “virtuous cycle” whereby spending the majority of your meager pension on alcohol leaves that much less for food which ultimately leads to starvation and death. Either way, you are no longer a burden to Society. And for those of you who think it can’t happen here, Think again.


A few years ago, my sister and I began to notice that people we knew – or friends of friends – were being told by their doctors that there was nothing they could do for them and they had (basically) 17 days to live. After a little thought we realized that this would give them just enough time to find a lawyer, draft a will and settle their affairs. We know between 10-12 individuals of all ages that have received this diagnosis, with diseases ranging from various forms of cancer to advanced liver failure. The interesting thing about these people is that many of them seemed in reasonable health before going to the doctor. Our favorite story involves a young woman (late teens) who was told she had advanced ovarian cancer and that there was nothing they could do, giving her about a month to live. She told them she didn’t believe it, that they were wrong and went about her business. She lived almost two more decades, had children and a full life. Another friend of mine was told he had pancreatic cancer and could die any day. They wouldn’t even admit him into the hospital, and sent him straight to Hospice. He went home and started drinking. A year later he finally succumbed, but it had as much to do with a fall he took while drunk which displaced his hip, making him unable to walk as anything else. I could go on, but the point is this: Life is fragile. Spend your time wisely. Oh Yea. And never go to the doctor.


I don’t know what Life is about; and I’m not happy about that. But I do know this. Living in constant mental, physical, or emotional pain and suffering is not the answer. I suppose we all have to die, so the point is NOT expending resources postponing the inevitable, but making the time leading up to the Final Curtain rich and fulfilling. This is where Healthcare (and Alternative Approaches) can truly add to the quality of life (and Economic Value for you MBA-types) of Individuals and Society. But also where only a fraction of most Healthcare dollars are spent (at least according to every study commonly sited by the Media). And as the Republicans like to point out, there is also Personal Responsibility – at least for those who have limited Economic Potential and few resources and alternatives. On the other hand, a former Master of the Universe gets a mechanical heart that according to the media doesn’t beat and can run for decades. So go figure.

What can I say. Life sucks. It’s a bad ride on a downhill slope that cost too much and has few rewards. So as one with limited Economic Value I am well on the way to implementing the preferred strategy. Cheap Beer and (Fukashima-tainted) Cat Food, a damn good start. DNR.

The Missing Billions

Health care providers who have been audited suffer from billions of dollars being held in escrow until their cases are settled.

This situation is being exacerbated by the growing backlog in appeals.  It places tremendous strain on a provider when their payments are being impounded. According to Bryan Cave LLP “the appeals process for claims deemed improper by RACs is far too slow and leaves significant funds tied up for … years. . . . [T]his has a significant impact on the ability of hospitals and providers to serve patients. They have had to cut jobs and delay purchasing new equipment.”

Health care providers appeal because appeals work.  In 2014, hospitals reported that 52% of RAC denials had been appealed, and the success rate was 66%.  It appears that 43% of all Administrative Law Judge (ALJ) appeals are successful.

Exclusion Law

Exclusion from Medicare and Medicaid (and all Federally funded health programs) is a serious penalty.

The Department of Health and Human Services, Departmental Appeals Board, Civil Remedies Division, publishes its decisions, and from these it is possible to ferret out a few rules of the road.

There is a great variety of cases leading to exclusion.  A surprising number involve fines against convenience stores that sell cigarettes to minors.  Many concern doctors or registered nurses who are excluded from Medicare and Medicaid because of loss or suspension of their license in the state where they work.  A number of cases involve health care providers who argue the number of years for exclusion is too great.

Sadly, there are all too many cases of Skilled Nursing Facilities being fined or shut down because of abuse of their patients, usually helpless elders.  It was a shock to see how many suppliers of medical equipment are kicked out of the program because on the day an inspector showed up, they were not open during their posted hours.

The harshest penalties come from those excluded because of being convicted of a felony.  These include actions such as “unlawful manufacture, distribution, prescription, or dispensing of a controlled substance” Baldwin Ihenacho, DAB CR4002 (2015); five years exclusion for “criminal sale of a prescription for a controlled substance” (the narcotic PercocetShaikh M. Hasan, M.D., DAB CR3663 (2015) or forging prescriptions for narcotics Marcie A. Conlon, DAB CR3338 (2014) or “unlawfully writing multiple prescriptions for Oxycodone in exchange for direct cash payments of $200 per prescription.” Jose C. Menendez Campos, M.D., DAB CR2923 (2013).

From these various cases, it is possible to derive a number of lessons regarding the administrative law and how it is applied to the facts.

Nolo Contendere

A plea and acceptance by the court of nolo contendere to an offense qualifies as “convicted” within the meaning of section 1128 of the Act, thus triggering mandatory exclusion.  Gustavo E. Borjas, DAB CR3334 (2014) (solicitation to purchase cocaine)

“Good Faith” Billing Mistakes or Reliance on Billing Expert

No excuse allowed.  Proof of culpability is not needed to justify revocation under 42 C.F.R. Sec 424.535(a)(8).  Louis J. Gaefke, D.P.M., DAB No. 24554 at 5-6 (2013).  “On its face 42 C.F.R. § 424.535(a)(8) does not distinguish between false claims that are filed accidentally and those that are fraudulent or filed with willful disregard of their truth.”  Access Foot Care, Inc./Robert Metnick, D.P.M., DAB CR4113, at 3, (2015).

Community Service and Character References

Some attempt to get their penalties reduced by showing they are well respected, or service special communities.  No go.  This information is irrelevant.  See George John Schulte, DAB CR3667 at 3, (2015) “The regulations require me to exclude irrelevant or immaterial evidence from the record.  . . .  the only issues I may decide in this case are whether the IG had a basis for excluding Petitioner and, if so, whether the length of exclusion imposed is not unreasonable. . . .  letters concerning Petitioner’s character, are not relevant.” See also Dinesh R. Patel, M.D., DAB CR3355, at 2, (2014) (community service of doctor is not relevant).

Payment of Restitution

Many bring up that they have paid restitution for the problem, and suggest this is a mitigating factor.  No go. “[R]egulations direct me to consider the entire amount of financial loss ‘regardless of whether full or partial restitution has been made.’ 42 C.F.R. § 1001.102(b)(1).”  Donald Kent Blaine, DAB CR3427, at 3, (2014).


Documents containing hearsay may be included in hearings, which are not bound by Federal Rules of Evidence.  There is no automatic hearsay exclusion rule. Karen R. Morgan, DAB CR3331, at 2, (2014).

Mitigating Factors

The wrong-doer has passed away; the company paid restitution; the company needs to continue operating in order to pay off the penalty.   None of these are considered mitigating factors. 42 C.F.R. § 1001.102(c).” Kirpa, LLC, DAB CR3247, at 4, (2014) (emphasis added) 

There are a number of interesting features in the litigation of the Departmental Appeals Board.   This blog post was meant to give you a taste of a few interesting features in this unique environment.