Caught in the PSR act

15 minute read

The scheme that polices Medicare leakage works in secret, but its icy presence is felt in practices everywhere.

The thought of encountering the Professional Services Review strikes a chill into the heart of many GPs, even if few have a clear picture of how the secretive agency works. 

Last year, a Healthed survey of more than 1200 GPs found 47% – nearly half – thought fear of the PSR compromised their ability to provide good quality care.  

More than 80% of those surveyed said they would feel anxious if they received a message from the PSR about billing; 44% of GPs believed the PSR was effective but caused a significant amount of unnecessary harm, while 28% believed the agency was ineffective and counterproductive to doctors’ health. 

Doctors who’ve been investigated by the PSR, as well as those familiar with its operations, have told TMR of a sense that once they have you, it’s all over. Doctors say they have been affected personally, professionally and financially by an investigation. 

Critics speak of what they see as a sinister ability to operate virtually in secret, with only lip service paid to transparency and accountability. 

You wouldn’t get this impression from reporting in Nine newspapers and on the ABC this morning and on 730 tonight (Monday), claiming that “Billions of dollars are being rorted from Medicare each year by medical practitioners”. The stories go on to say that errors and overservicing – not just outright fraud – contribute to a leakage of around $8bn each year on Medicare, and quote former PSR director Dr Tony Webber as saying his concerns about “egregious” doctor behaviour were “shut down” by government.  

Dr Margaret Faux, a health system administrator, lawyer and registered nurse with a PhD in Medicare compliance, and a regular contributor to The Medical Republic, is the source of the $8bn estimate.  

Readers of the Nine/ABC stories would assume Dr Faux was a supporter of the PSR, when in fact she is scathing of the scheme’s inefficiency, its lack of accountability and its injustice towards medical practitioners, who must bill through the impenetrably obscure legal instrument known as Medicare.  

According to the PSR’s latest annual report, “Negotiated agreements and final determinations resulted in repayment orders totalling $24,674,440 for the year.” 

Which means, if the $8bn figure is accurate, that for all the fear caused and the doctors’ lives affected by a harrowing quasijudicial process and huge individual repayment orders, it recoups only about 3% of the leakage.  

Health Minister Mark Butler responded this afternoon by asking the Department of Health for an analysis of Dr Faux’s work “and a report on the Department’s existing compliance, audit and Professional Services Review programs”.

Meanwhile, how has the doctors’ billing watchdog come to this? 

Secret committee members’ business 

The enabling legislation that defines the powers of the PSR is the Health Insurance Act 1973

The final section (106ZR) of the PSR chapter contains restrictions on the disclosure of committee deliberations and decisions, or of information or evidence given to the committee during its investigation. Effectively, next to nothing goes outside the committee room.  

There are limited exceptions, such as when disclosure is needed when obtaining or giving legal advice, or when someone needs to see information because they are giving evidence to an investigating committee. 

Otherwise, disclosing information can lead to a 12-month prison term, effectively gagging any discussion of what goes on behind the PSR’s closed doors. 

“Unless a finding of inappropriate practice is made, information about the person under review is not made public,” the Department of Health told TMR in a statement. “However, if the PSR Determining Authority makes a final determination that becomes effective, then they may publish details of the person under review, the directions made by the Determining Authority, and the nature of the conduct that resulted in a finding of inappropriate practice. 

“PSR publishes the outcomes of cases on its website. PSR’s policy regarding whether or not to name a practitioner is also published on its website,” DoH said. 

“The privacy and secrecy requirements in the Act protect those practitioners who are not found to have engaged in inappropriate practice and ensure that patient information is protected.  

However, according to Dr Faux, while protecting doctors’ and patients’ identities might have been a legitimate concern in 1994, when the PSR was established, this is no longer so. 

“Our judicial system has become very good at protecting the identities of people,” she says. “They protect the identity of litigants – they call them ‘applicant one’ and ‘applicant two’ – and if there’s children involved, they’re not named. So that argument that section 106ZR protects doctors or patients is no longer viable in 2022.  

“The only reason section 106ZR continues to exist is to protect the process and what’s actually going on behind closed doors,” Dr Faux says. “The PSR has consistently held itself up as the bastion of natural justice and procedural fairness. But if that’s true, then they’ve got nothing to hide. They should support the removal of section 106ZR. 

“Why on earth are we not allowing doctors to talk? Some doctors would be very worried and they’re scared for their reputations, as we all know, but if enough of them spoke out about what they’ve been through, I think things would change. 

“At the moment, they’re terrified.” 

Who sets the scope? We do 

When the chief executive of Medicare asks the PSR director to review a health practitioner’s billing record, the scope of the review is largely in the director’s hands. Section 88 of the Health Insurance Act allows them to review “any or all of the services” provided by the doctor during the review period and they can “undertake the review in such manner as [the director] thinks appropriate”. However, the Act makes little effort to define “appropriate”. 

If a PSR investigation reaches the committee stage, then section 80 provides a similar level of power to the committee. The panel “can investigate any aspect of the provision of the referred services and its investigation is not limited by any reasons given in a request for review or a Director’s report following a review”. 

According to DoH, the Medicare chief executive’s request is “an initiating step” in the PSR review process. That request is based on Medicare claiming and PBS prescribing data and, where relevant, interviews with the practitioner conducted by departmental advisers, who are qualified health professionals, as well as submissions from the person under review.  

“The director can request and review patient records, which enables a more complete review of a practitioner’s provision of services through considering clinical records, which can be reviewed alongside service data and information provided by the practitioner,” DoH said. 

“If the director refers a person under review to a committee, the committee has no power to investigate services that were not the subject of that referral. However, the committee may ask the director to review other services if significant issues arise in the course of the committee’s investigation.” 

While a committee is supposed to investigate whether a practitioner has engaged in “inappropriate practice”, its definition is vague. It’s inappropriate practice if the committee “could reasonably conclude … that if the practitioner rendered or initiated the services as a general practitioner, the conduct would be unacceptable to the general body of general practitioners”.  

In 2013, Mark Robinson SC, a barrister very familiar with the PSR law, delivered a conference paper in which he expressed concern that the concept of “inappropriate practice” went beyond just excessive Medicare billing. As a result, practitioners might be overly wary about the services they provided and patient care could be compromised. Exactly the type of fear identified by the Healthed survey.  

“Due to the pervasive effect of [the law], the Commonwealth can now be regarded as being present – ‘in between’, as it were – the general practitioner and his or her patient during actual consultations,” Mr Robinson said. “The Commonwealth is therefore intervening in the actual professional delivery of clinical medical services and care.” 

According to Dr Faux, the scope of an investigation can be “outrageously wide”. 

“They can basically do whatever they like,” she says, “and if that wasn’t problematic enough, they do it in secret, so you’ve got this situation where it’s literally like a Star Chamber.” 

Extrapolation and acting on a ‘hunch’

The PSR laws allow the agency to take a sample of billing activities, review them, and then extrapolate their findings to a sometimes much larger group of actions of the same type – but without reviewing those outside the sample. 

“They can look at 25 item 23s, but they will then extrapolate across every item 23 you’ve ever claimed in the period of the investigation,” says Dr Faux. “What we know from the evidence – and the same has happened in America – is that extrapolation in a fee-for-service scheme like ours doesn’t work because it leads to manifestly unjust results. 

“We don’t know that doctor billed 10,000 item 23s incorrectly, we just think they probably did. It’s outrageous that we prosecute people and destroy their lives so comprehensively on the basis of a hunch.” 

In 2017, former health minister Greg Hunt provided a determination that specifies the content and form of a sampling methodology that can be used. The committee needs to collect a random sample of at least 25 provided services from the same “class” (such as the same billing item number). Fortunately, if it finds that under 10% of the sample’s services were inappropriate, the committee must disregard the sample.  

In reviewing the sample, they can demand records, including clinical records, from any part of the review period. And if the committee makes a finding against the doctor under investigation, this can lead to their demanding huge repayments if the doctor is penalised based on the extrapolation. 

Evidently, there’s a problem

“The PSR committee’s not bound by strict rules of evidence, but that itself is not necessarily an issue,” says David Gardner, director of Gardner Legal & Regulatory, which specialises in assisting clients with PSR, AHPRA and Medical Board notifications. “However, I think problems tend to arise in a couple of situations. 

“First, there’s no legally trained person on the committee – that, to me, is a pretty significant problem.” 

One of the advantages of disciplinary tribunals, such as anti-corruption commissions, is that they’re headed by a legal professional, often a retired judge, he says. They can consider questions such as the weight to give to evidence and how common law rules should typically be applied. 

“[In a PSR committee], even though you’re not bound by the rules of evidence, you should still have regard to them because they’ve all come as a result of hundreds and hundreds of years of decision making. The committee members just simply haven’t been trained to actually have regard to those rules and to consider evidence in the same light. 

“The check on that is the option to seek judicial review,” Mr Gardner says, “but the problem with that is it’s very expensive.” 

A judicial review may find the committee didn’t treat the evidence properly but decide this wouldn’t have changed the result and therefore the judge will do nothing. Meanwhile, a successful judicial review application will almost always send the case back to the decision maker.   

“You’ll send it back to the committee and they’ll say, Okay, yeah, we had regard to the wrong evidence, but now we’ve had regard to the right evidence and we’re going to make the same decision,” says Mr Gardner. “Or it’ll get sent back to another committee, and you have to spend another two weeks there. So, the actual remedies if they do the wrong thing are problematic. It’s often not particularly useful to seek judicial review.” 

The billing rules or “standard” the committee decides the doctor should have followed are also problematic. 

“The standard is essentially created by the committee – there’s no document, no actual standard they bring in,” Mr Gardner says. “They create it and that is what the legislation entitles them to do. It puts the practitioner in the position where they do not know the standard until they sit in the committee, and if they say the standard is wrong, they have no recourse. There’s nothing they can do about that. That, to me, is a huge problem.” 

The Healthed survey reflected this view in finding that less than one third of GPs (32.75%) felt they had a good idea of what billing limits the PSR had set for some items, such as telehealth. 

The PSR process has previously had a merits review option, allowing the clinical appropriateness of a standard to be challenged. This is now gone. 

“I think the major problem with it really is this lack of a merits review,” Mr Gardner says. “[The PSR process] has the appearance of procedural fairness – there are very few administrative processes with as many opportunities for a practitioner to respond as this one – but that doesn’t really matter if the responses don’t mean anything and the people in the system don’t really care what you say. 

“The merits review was the best opportunity for a practitioner to go to someone and say, they actually got this wrong.” 

Moving the deckchairs in the Senate

Legislative change may be coming, with a government bill to amend the PSR scheme awaiting debate in the Senate. However, if passed it will do nothing to address the shortcomings in the law. In fact, it will merely increase the powers of the PSR Director by allowing them to sanction corporations, not just individual health practitioners. 

The bill was framed by the previous government in October 2021, and was reintroduced in virtually identical form by the Albanese government after the election. 

The Senate’s community affairs committee recommended in March 2022 that the bill be passed, but encouraged the government “to continue stakeholder engagement and consultation processes to improve the operation of the PSR”, noting “the complexity of the Medicare system, compliance burdens for practitioners and the adequacy of support to achieve compliance”. 

But Labor Senator Katy Gallagher appeared to make the government’s position clear when she introduced the bill in early August. 

“The primary intent of the bill is to both strengthen the compliance powers of the Professional Services Review … and to add a degree of flexibility to the PSR’s ability to address the inappropriate practice of corporations,” Senator Gallagher said.  

“Historically, compliance activities have concentrated on the behaviour of individual practitioners, on the principle that practitioners are ultimately responsible for what is billed under their Medicare provider numbers. While this principle remains critical, the government needs to adapt its compliance arrangements to an environment where corporations are employing or otherwise engaging practitioners, and are increasingly involved in, and influencing the provision of, health care services.” 

So, what is to be done?

Some of the sources who spoke to TMR for this piece say a Royal Commission is needed to address the power of the PSR, its secrecy and lack of accountability. The AMA’s Victorian branch called for a similar commission into AHPRA earlier this year, although their motion was not approved by federal AMA. 

“I think the system itself is not accountable to anyone,” says Mr Gardner, “and there is no real check on the committee’s decision making. Committee does not answer to anyone except where it doesn’t follow the right process. But if it follows the right process, but is factually way off the mark, then it doesn’t matter. 

“I think the system is pretty broken and has been for a long time. And I think the best way to demonstrate that is through the tiny amount of money that it recovers for a lot of work and a lot of stress to a small number of people.” 

While doctors are justifiably scared of the agency, Dr Faux says interest among the legal community is growing. 

“We’re getting a cohort of lawyers who are quite skilled in [the PSR section] of the Health Insurance Act. But that’s it – what we don’t have is lawyers who have gone beyond that and looked at the entire health system, who’ve actually administered medical bills. There aren’t many who’ve got the big picture and who’ve billed the item numbers and who know how Medicare works. 

“But we’re getting there slowly,” she says. “We’re getting lawyers who are starting to take up the fight.” 

Forthcoming stories on the PSR will look at the methods by which doctors are singled out for PSR attention and how difficult it is to argue your way out.  

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