Growing Scrutiny of Medicare Advantage; Psych Bed Profit Motive; Rural Ransomware

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Welcome to the latest edition of Investigative Roundup, highlighting some of the best investigative reporting on healthcare each week.

Growing Scrutiny of Medicare Advantage

Teresa Ross, a longtime manager at the Seattle health plan Group Health, filed a sealed whistleblower suit against the company years ago, alleging there were problems with the way it billed Medicare, Bloomberg reported. She and other whistleblowers coming forward claim that insurers are scamming Medicare out of billions of dollars.

After years of investigating, the Justice Department took up Ross’s case last year, Bloomberg reported. Other whistleblowers came forward as well, accusing Kaiser Permanente, which Group Health merged with in 2017, and some of its competitors, of inflating how sick members are to get higher payments from Medicare.

“The industry vehemently contests the allegations and says that plans get paid appropriately for the risk they take on,” Bloomberg wrote. “But the disputed billing practices at the heart of Ross’s case have become central to the health-care business and, as baby boomers retire, to America’s fiscal future.”

Nearly half of people on Medicare receive their benefits through Medicare Advantage, or private plans such as the one Ross worked for, which get paid more for patients with more severe illnesses, Bloomberg reported. And cumulative extra payments, compared to what traditional Medicare would have paid, will soon top $100 billion, according to the Medicare Payment Advisory Commission.

Seniors have “flocked to the private version of Medicare,” Bloomberg wrote. And “insurance companies have built billion-dollar businesses propelled by this growth.”

But, “Official scrutiny is growing,” Bloomberg added. In February, the Justice Department said that it pursued health plans that gamed the system through “submitting unsupported diagnosis codes to make their patients appear sicker than they actually were,” Bloomberg reported. And the agency cited Ross’s case as an example.

Kaiser Permanente’s Washington state subsidiary denied Ross’s allegations, Bloomberg reported. Without admitting liability, the health plan resolved the lawsuit in a settlement for $6.3 million. The case against a vendor the health plan had hired remains ongoing, as do a number of other whistleblower lawsuits against Kaiser Permanente and other insurers.

Psych Bed Profit Motive

As psychiatric facilities prioritize out-of-state children, kids in South Carolina who need “immediate, around-the-clock” care are at risk of being stranded for days or weeks, and being sent hundreds of miles away from home, Kaiser Health News reported.

The problem isn’t due to a shortage of beds, state agency leaders told KHN. Rather, they said it’s happening because many of South Carolina’s 518 licensed beds for children are filled by patients from other states.

“The reason comes down to the bottom line of the facilities, which are driven by states’ reimbursement rates, since Medicaid often covers such patients’ care,” KHN wrote.

South Carolina’s rate has been about $330 a day, among the lowest nationwide, Deborah McKelvey, executive director of Windwood Family Services in rural Charleston County, told KHN. Other states pay as much as $800.

Seven other psychiatric residential treatment facilities for children in South Carolina operate as for-profit companies, KHN reported. Three of those are owned by a portfolio company of private equity firm Bain Capital. And some healthcare researchers continue to warn that private equity investment in the industry prioritizes profits over patient care.

Though South Carolina Medicaid recently raised its reimbursement rate to $500 per child per day “in a bid to entice the for-profit facilities to admit more of the state’s children,” S.C. Health and Human Services Director Robbie Kerr, said that the move may not be enough, KHN reported.

“It isn’t uncommon for U.S. children who need intensive psychiatric care to travel to another state for treatment,” KHN wrote. “Yet many psychologists and child welfare experts suggest that kids who receive this care closer to home will be more likely to succeed.”

Ransomware Attacks Hit Rural Hospitals

As ransomware groups become more opportunistic, rural hospitals and smaller healthcare facilities are facing “the reality of being locked up,” once seen as a concern “reserved solely for major health systems,” STAT reported.

Federal databases show providers, such as pediatric clinics, hearing centers, chiropractors, and child abuse prevention organizations being caught up in attacks targeting the healthcare system, STAT reported.

“Such an attack can be devastating for a health system of any size and scary for anyone relying on its care,” STAT wrote. “But for smaller hospitals and practices, the costs — both to patients and to the bottom line — can be especially steep.”

Experts told STAT that rural and smaller providers are also less likely to be prepared to defend themselves against a ransomware attack — and resolve and recover from one — than larger, urban institutions.

Vulnerabilities at smaller providers may be seen by attackers as a testing ground for exploits targeting a larger system, Lee Kim, a senior cybersecurity and privacy principle at the Healthcare Information and Management Systems Society, told STAT. And if a rural provider is located near a military base or major tech hub, it may offer an opportunity for stealing non-civilian or high-profile patient information.

Ultimately, the fallout for rural and smaller providers can range from extreme costs and financial strain from low patient volume in the wake of an attack, to having to shutter, losing patient trust, and even fielding lawsuits from patients, STAT reported.

“That kind of pressure really is a wake-up call for many organizations,” Kim told STAT. “It can make or break an organization.”

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    Jennifer Henderson joined MedPage Today as an enterprise and investigative writer in Jan. 2021. She has covered the healthcare industry in NYC, life sciences and the business of law, among other areas.

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