Medicare would pay for experimental devices used in federally approved clinical trials, the agency said, as long as the new procedures didn't cost more than those they replaced. The new rule, generally applauded, means seniors may now benefit from the latest medical technology. It has also had another effect. Coupled with other problems, health investigators say, it has damaged a once promising federal criminal inquiry into millions of dollars of suspected Medicare fraud. Evidence showed that some hospitals had submitted phony claims to obtain Medicare payments for unapproved devices and procedures.
Investigators now maintain that evidence of widespread fraud was lacking.
According to an unnamed whistle-blower, who has sued in a Seattle federal court, many of the hospitals changed billing codes for noncovered experimental devices to fool Medicare examiners into thinking they were paying for approved procedures. Donald Warren, an attor ney representing the whistle-blower, charges that some physicians even held seminars on how to dupe Medicare. Some evidence is explosive. In Sacramento, Calif., a top administrator at Sutter Memorial Hospital suggested in a 1994 memo that officials there knew Medicare did not reimburse for experimental defibrillators and pacemakers but billed for them anyway. To avoid denial of payment, the administrator said, the hospital removed forms that identified the devices as experimental.