A whistle-blower’s allegations – that six Mediclinic hospitals are guilty of irregular billing practices – have opened a can of worms, with forensic investigations now being launched by the hospital groups and medical schemes themselves.
The source had sent an email to more than 50 principal officers of some of South Africa's largest medical schemes, naming specific hospitals in Gauteng and the Western Cape accused of manipulating patients’ bills to save the hospital group money.
News24 reports that the email was also sent directly to Greg van Wyk, CEO of Mediclinic Southern Africa.
Mediclinic was accused of not acting against employees who allegedly manipulated accounts, citing a recent apparent incident where coding was changed on the source of medicine to benefit a Mediclinic hospital.
The whistle-blower also included details of where auditors can begin their investigations, reports Daily Maverick, which has a copy of the email that details how the paper trail can be traced and who should be interviewed and questioned.
The hospitals named are Mediclinic Kloof, Mediclinic Morningside, Wits Donald Gordon Medical Centre, Mediclinic Cape Gate, Mediclinic Vergelegen and Mediclinic Panorama.
When hospitals submit medical bills to medical schemes for payment, they have to submit an ICD-10 code, which varies depending on the procedures carried out or the medication administered.
The whistle-blower, apparently a former manager who worked in at least one of the six hospitals as a clinical case manager and coder, told News24 that, for example, “When a patient died in a hospital emergency room, sometimes Mediclinic case managers were expected to change their accounts to reflect an ICU death instead.
“This is because of the fixed fees associated with emergency room deaths, which are lower than ICU-related fees.”
The person said patients’ conditions were manipulated to either bill at an ARM (alternative reimbursement model), or coding was used to “carve an account out” to bill for services where the loss would be too significant for the hospital.
ARM is an agreement between a medical scheme and a hospital to pay a fixed amount for specific medical care or to treat a specific disease.
The alternative would be that the medical scheme would have to pay for every service rendered. Medical schemes often prefer the ARM option, because they believe this may discourage hospitals from providing unnecessary services that schemes have to cover.
But when Mediclinic faces a large loss under an ARM case, the whistle-blower claims some employees would manipulate the coding of cases to save the hospital group money.
Mediclinic has been using ARMs that are mostly related to a “bundled payment” for a procedure, one industry executive with extensive experience in medical claims said.
Hip and knee replacements would be the ARMs that Mediclinic might use most, he added.
In this case, an ARM means that there will be a fixed fee for a replacement, regardless of how long the patient stays in the hospital or what complications arise.
“The hospital takes on the risk – they receive a good fee for each procedure, and if the doctor is skilled and the patient is discharged quickly, everyone wins.”
However, the hospital has to bear the costs if there are complications and the patient consequently stays in the hospital for a longer period.
“If Mediclinic manipulates the codes to exclude complicated cases, it is fraud. It may result in the valuable alternative reimbursement model being discarded along with it and that would harm the entire industry.”
Other allegations include that at at least three hospitals, staff monitored the hospital’s daily profit and loss reports to add the high-cost coding when losses grew too large.
The author of the email said a detailed clinical audit of all Mediclinic hospitals was needed, “as I am sure this is a standard culture in the group, and not just the hospitals at which I worked”.
The source also provided details of how the alleged fraud spans different job functions from reception to the billing department, case managers, confirmation clerks, credit controllers and patient admin managers.
In response to the explosive revelations, Mediclinic’s chief executive, Greg van Wyk, said the group viewed the allegations in an extremely serious light, and had commissioned an independent forensic investigation by ENSafrica to investigate the claims and the implicated hospital operations.
Mediclinic, which is no longer listed on the JSE after a buyout by a Remgro/MSC consortium, has appointed Steven Powell, head of law firm ENSafrica’s forensics practice, to head an independent audit.
“Steven Powell is a highly credible and independent forensic expert… familiar with independent investigations of this nature, with a sound understanding of the business dynamics of the industry,” said Van Wyk, and the group was confident his investigation would confirm its billing processes are accurate and ethical, reports Business Day.
Powell is well known for his forensic work and conducted an investigation into IT group EOH, finding that it benefitted from state tender fraud. His probe found that then-deputy Security Minister Zizi Kodwa received millions from EOH; Powell also testified at the State Capture Inquiry.
“Mediclinic prides itself on applying uncompromised ethical practices throughout every aspect of its entire business,” added Van Wyk. Should the external experts find any accusations true, “Mediclinic will not hesitate to act decisively and appropriately to the findings”.
The whistle-blower had claimed to have resigned from Mediclinic, “and indicated in my exit interview that I feel the company doesn’t live up to its ethics and I am afraid, if I were to raise my concerns, as did my colleague at (a Gauteng hospital), I’d also be victimised, so I’d just leave the company quietly”.
The person cited an alleged instance where a new employee reported the manipulation to the Mediclinic ethics line and was victimised afterwards, which led to her resignation.
Some of the suspect clinical coding was referred to KPMG, without any repercussions, the source claims. But in response, a KPMG spokesperson told News24 that it “is not aware of the alleged manipulation at Mediclinic or at other hospitals”.
Council for Medical Schemes (CMS) registrar Dr Sipho Kabane said the matter was extremely concerning, as was the possibility that medical scheme member funds may have been acquired by Mediclinic hospitals through fraudulent means.
“This would have led to members suffering premature exhaustion of their funds, leading to unnecessary out-of-pocket and catastrophic health expenditures,” he said.
CMS is “calling for a comprehensive, unhindered and speedy investigation by an objective and trusted authority”.
“The investigation should not just aim to get the names of the responsible parties apprehended but should also ensure the funds involved are quantified and returned to their rightful owners – the medical scheme members.”
According to the latest annual council report, medical scheme members paid more than R32bn in out-of-pocket payments last year.
Administrators investigating
Ryan Noach, chief executive officer of Discovery Health, says the medical scheme has already launched an investigation into the claims.
“We have been assured by Mediclinic of a full and thorough investigation, including a comprehensive report on the findings and outcomes of the independent review they have commissioned. Discovery Health Medical Scheme will determine what further action is required from these external and internal investigations.”
He said Discovery was “in touch with top leadership at Mediclinic and we are assured of their efforts to establish the truth”, reports Business Day.
“There is good faith in the 30-year contractual relationship and we will do all (that is) needed to guarantee schemes and members of the fidelity of their funds and claims.”
However, he pointed out that the CMS’ statement about members being at risk of running out of funds was incorrect with regard to members of Discovery Health Medical Scheme (DHMS), as it did not impose limits on claims for hospital admissions.
Medscheme (owned by Afrocentric) said it would be conducting its own investigations, as would Momentum Health Services.
Jeremy Yatt, principal officer of Fedhealth, one of the many medical schemes contacted by the whistle-blower last week, said he would be “very surprised” if Mediclinic management were found to be guilty.
“At a hospital level, maybe an employee is trying their luck, but it seems unlikely this was (company) policy, as alleged,” he said, adding that hospitals don’t need to resort to fraud, since they already account for the lion’s share of medical schemes expenditure.
Medical schemes spent billions on hospitals
The latest industry report from the CMS pegs hospital expenditure by medical schemes in 2021 at R74.3bn.
According to the report, the average amount paid per beneficiary for hospital services increased by 18.56% to R8 346.40 from R7 039.74 in 2020. Just more than 92% of the total hospital expenditure was paid to private facilities.
Expenditure on hospital services paid on a fee-for-service basis amounted to R57.34bn in 2021, and close to 64.39% of this was attributed to ward fees, theatre fees and consumables, with expenditure on medicines (in-hospital) standing at R5.07bn.
‘Reimbursement would be the minimum’
Damian McHugh, executive head of marketing at Momentum Health Services, told Daily Maverick the administrator had launched its own comprehensive retrospective investigation going back at least a year.
Although the investigation is focused on Mediclinic, McHugh said forensic investigators may take a closer look at the billing practices of the other private hospital groups.
“This could just be a disgruntled former employee, but the level of information is detailed and they seem to know exactly what they are talking about. If these allegations are true, it would be quite alarming. I think at the very least, medical schemes will expect to be reimbursed where there was incorrect billing applied,” he said.
McHugh also noted that the problem might be confined to the six hospitals mentioned by the whistle-blower, rather than a companywide problem.
“There’s just no way to know until we investigate. We are liaising with Mediclinic and will compare investigation results once the process is complete,” he said.
Profmed principal officer Craig Comrie said the scheme was still gauging the potential effect of the alleged billing fraud. “Regardless of the scale of the allegations … we are concerned about the culture of upcoding fees and abuse in billing behaviours which need to be addressed,” he said.
The National Department of Health told IOL last week that it “noted with concern allegations of patient bill manipulation at private hospital group Mediclinic, but is not in a position to investigate private hospitals as they remained relatively unregulated”.
News24 article – Fraud claims: Mediclinic names independent investigator (Open access)
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