Article: Wider Probe of Medicare Firms

Wider Probe of Medicare Firms

Senate Panel Expands Inquiry Into Contractors' Finances

By Gilbert M. Gaul
Washington Post Staff Writer
Saturday, December 10, 2005

A Senate committee is expanding its probe of private Medicare contractors that receive hundreds of millions of dollars annually from the government to investigate patient complaints and help hospitals and nursing homes improve care.

In a letter sent Thursday to a New Jersey contractor, the chairman of the Senate Finance Committee asked for a detailed accounting of the group's operations and finances. Among the questions: why the contractor paid more than $500,000 to the 21 members of its nonprofit board and spent an additional $100,000 on retreats for the directors in the Cayman Islands and California in 2003 and 2004.

"It is difficult to understand why an entire board would need to travel from New Jersey to the Grand Cayman to discuss improving quality of care for [Medicare] beneficiaries, but I am eager to receive your detailed and documented explanations," wrote Sen. Charles E. Grassley (R-Iowa).

The New Jersey contractor, which recently changed its name from PRONJ to Healthcare Quality Strategies Inc., is set up as a charity under the tax code. In 2003, it reported revenue of $11.8 million from Medicare and other sources, according to its tax return.

It is one of 53 contractors known as Quality Improvement Organizations that Medicare pays about $300 million a year to investigate complaints and improve care provided by doctors, hospitals and nursing homes.

The Washington Post reported in July that the QIOs -- whose boards are dominated by physicians -- investigate few patients' complaints, rarely uphold allegations of substandard care and do not tell patients what, if any, corrective actions have been taken. The series also disclosed that PRONJ paid its board members about $500,000 in 2003, and its chief executive more than $500,000 with the use of a leased BMW.

After the Post series, the Senate Finance Committee sent letters to more than a dozen QIOs, including PRONJ, requesting preliminary data. Staff members are now sending out more detailed requests and have asked the Government Accountability Office and the Department of Health and Human Services' inspector general to help them review the QIOs' finances and operations.

The letter to PRONJ asks for a list of those who attended the retreats and the source of the funds. It also requests details about the process the nonprofit uses to determine board members' pay, and for total compensation for board members from 2000 to 2005.

Cari Miller, spokeswoman for the nonprofit formerly known as PRONJ, said yesterday that its 12-member executive committee, not the entire board, attended the retreats, and that they were not funded with government money.

Miller added that the $500,000 in board compensation could be overstated by as much as half because, she said, committee staff accidentally included a former employee's earnings in its calculation. She also said the QIO relies on a consultant to set executive and board compensation, based on what other New Jersey companies pay their executives, not on what other QIOs pay.

The Senate request comes as the contractor faces questions from medical and consumer groups about its salaries and effectiveness. The QIO receives about $6 million a year from Medicare yet ranked 43rd in quality among states, according to the most recent data released by Medicare in 2003.

"What I want to know is what exactly are we getting for the $6 million the QIO gets each year, except big salaries for the CEO and board?" said David Knowlton, a former state health official and president of the nonprofit New Jersey Health Care Quality Institute.

William Rollow, a physician who oversees the QIO program for Medicare, said more recent data show that quality in the New Jersey program "is improving significantly" under PRONJ. But Rollow said he couldn't release state-by-state figures until the data are published, probably early next year. Grassley observed in his letter that the 106 complaints reviewed by PRONJ in the last year "appears drastically low given the more than 1.2 million Medicare beneficiaries" in New Jersey. He asked the QIO to explain by Dec. 29 why there are so few complaints and what the contractor is doing to educate patients about the complaint process.

The national QIO trade group, the American Health Quality Association, said it is developing policies for the QIOs to adopt covering travel and compensation. The association's chief executive, David Schulke, said it is also developing recommendations for Congress that would allow QIOs to share details about their complaint investigations with patients and families. Currently, the groups are limited in what they can share by statutes and regulations dating back to 1986.