Monday, October 3, 2011

Cheating to Garner the Prize: Clueless Uncle Sam

Medicare bonuses for home health visits, instituted in 1997 to discourage inadequate care, resulted in a different distortion as for-profit companies manipulated visits to maximize reimbursement.   Bloomberg reported:

A Senate Finance Committee report released today alleges that companies encouraged employees to make enough home-therapy visits to reach thresholds for bonuses, no matter whether the sessions were medically necessary, from the federal program for the elderly and disabled.

Medicare noted the distortion when the rule gave the bonus based on ten visits.  They shifted to a tiered bonus, which caused several levels of cheating to attain the prize. 

The federal government had the opportunity to learn from private industry, where executive stock options, supposedly the most pure form of incentive compensation, became the focus of widespread manipulation by corporate chiefs over a decade.  It ignored the potential lesson, pushing pay for performance to the point where Medicare has a word salad menu of extrinsic motivation schemes.

Accountable Care Organizations - ACO
Medicare Shared Savings Program - MSSP
Value Based Purchasing - VBP
Bundled Payment Pilot - BPP
Comprehensive Primary Care Initiative - CPCI
Hospital Consumer Assessment of Healthcare Providers and Systems - HCAHPS

Due to an inability to learn, new incentive schemes will end up like the old. Behavior will change to garner the prize.  A good chunk of that behavior, 25-30% will be unethical.  Pay for performance is toxic.

Gail Wilensky should be intimately aware of this toxicity given her board role at UnitedHealth Group, which had a massive stock option cheating scandal, and her director seat at Gentiva, one of the home health companies accused of manipulating visits by the U.S. Senate.

Wilensky served on Gentiva's board from 2000 to 2009.  She left with three other board members as a result of a March 22, 2009 board meeting, where one board member disagreed with policies and practices of the company.  Wilensky served on the Clinical Quality Committee and chaired the Corporate Governance and Nominating Committee.  Did something smell like UnitedHealth Group circa 2006?  One doesn't give up a $152,000 a year part time job easily.  Were leaders dipping into the unethical P4P bin?

Wilensky pushed for Medicare pay for performance in 2003 amongst a who's who of health care leaders, Dr. Don Berwick, Nancy-Ann DeParle, William Roper and a smattering of insurance executives.  Their letter was a critical driver of current P4P efforts.

Qui tam lawyers must be drooling as Uncle Sam slams on the brakes, while simultaneously flooring the gas.  Pedals of extrinsic motivation must be manipulated.  Medicare has proven it knows how to create fraud, at least on the corporate level.

Update 10-4-11:  The full Senate report can be read here.   Medicare noted the system could be open to manipulation when they designed it.  "CMS recognized in its original rulemaking that a 10-visit threshold was ‘‘susceptible to manipulation.’’  Extrinsic motivators change behavior, usually to the detriment of quality.

Update 2-25-14:  A lesson from Wall Street on incentives and how they distort.  A trader on trial in New Haven federal court accused of defrauding investors of $2 million by lying on trades of mortgage-backed securities.  He said, "My lying is part” of making deals, although I generally consider myself a truthful person."

Update 12-24-21:  Committing fraud to garner performance bonuses resulted in U.S. military families getting substandard housing service from contractor Balfour Beatty.  The fraud ran from "around 2013 to around 2019."

“Instead of promptly repairing housing for U.S. servicemembers as required, BBC lied about the repairs to pocket millions of dollars in performance bonuses." 

Update 5-30-23:  HuffPo's "The Golden Age of White Collar Crime" stated:

32 percent of American managers said they were comfortable behaving unethically to meet financial targets.