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The agency tasked with oversight of Medicare billing is accused of ‘terrorising’ doctors as it recoups tens of millions in payments. By Rick Morton.

Exclusive: Government ‘star chamber’ targets doctors

A government agency with quasi-judicial powers designed to “protect” Medicare and described by a Federal Court judge as a “star chamber” for medical practitioners is now the subject of a civil misfeasance in public office lawsuit as well as a separate independent review of controversial repayment agreements.

The Professional Services Review (PSR) agency, with just 28 full-time equivalent staff, is the apex body for Medicare compliance and says its role is to “protect patients and the community from the risks associated with inappropriate practice” and to “protect the Commonwealth from having to meet the cost of medical/health services” resulting from such practice.

In the past financial year the body, led by Professor Julie Quinlivan, negotiated more than $21 million in repayments from doctors and other medical professionals as a result of statistical analyses that indicated – but did not prove – they were inappropriately claiming more for certain services from both the Medicare Benefits Schedule (MBS) and Pharmaceutical Benefits Schedule (PBS) than their peers. Essentially, the body takes a random sample of doctor’s bills; if the number of procedures is above average, the agency investigates and seeks to claim back money from the doctor.

In multiple tellings, including from senior legal minds who have worked with and against the PSR on civil matters, The Saturday Paper has heard these section 92 agreements used under the scheme have evolved into an arbitrary system designed to “reduce the cost of Medicare by terrorising doctors”.

It is an extraordinary claim that requires extraordinary evidence.

Take the case of central Queensland ophthalmologist David Kitchen, who has so far achieved what few others have managed: a legal victory that has thrown out every decision made about him by the PSR and the subsequent decisions of a medical review committee set up under the auspices of the PSR.

It took him four years and more than $1 million in legal fees, a figure that does not include lost income and other professional damages, to achieve this. According to the Federal Court of Australia, his matter should never have been referred to a PSR committee in the first place.

For Kitchen, the only full-time resident ophthalmologist in a region servicing more than 200,000 people, the process began in the middle of 2017 when a routine statistical analysis conducted by the chief executive of Medicare found he had delivered more Medicare services than 99 per cent of all other ophthalmologists active for benefits in the year to January 31, 2017.

“The variance in your services compared to peers is such that there is concern whether each service met all MBS requirements, contained an appropriate level of clinical input as judged by peers, and would be considered clinically relevant,” the Medicare chief executive’s delegate, Dr Amanda Favilla, wrote to Kitchen on October 19, 2017, after an initial interview round.

What the government did not consider, however, was that Kitchen was also in the 99th percentile for patient numbers after opening his dedicated Central Queensland Cataract Centre in May 2015, which offered fully bulk-billed services and no-gap surgery.

In his response to the concerns outlined by Favilla, Kitchen noted that he was the “cheapest in Queensland for insured and uninsured patients” and that his services often saved pensioners and other people on low incomes from having to travel to Brisbane for necessary surgery.

He is also among the fastest and, owing in part to a practice with some 20 staff at the time, is able to focus on clinical attendance alone rather than setting up consulting rooms or administrative work.

“Today, for example, I had an emergency call from the Rockhampton Base Hospital. There is no other ophthalmologist around in Central Queensland except for me,” he said in his submission.

“Normally I would have agreed to see them that night in Rockhampton, but as a result of doubts about seeing patients (having just had another busy clinic with no doubt a decent number of services) I told them I was unable to see the patient and they were forced to send this lady to Brisbane.

“This is not how I want to practise medicine and this situation is not good for our community.”

Here, Kitchen was making reference to the “80/20” rule now enshrined in a regulation attached to the Health Insurance Act. It considers a “medical practitioner [who] renders or initiates 80 or more relevant services on each of 20 or more days in a 12 month period” to have engaged in a “prescribed pattern of services”. In short, if a doctor triggers this rule they are inviting automatic scrutiny from Medicare and the PSR. This rule, alongside the opaque machinations of the agency itself, manages significant savings to Medicare not just in repaid MBS fees but by preventing practitioners from seeing genuine patients and making them change otherwise legitimate work practices. The PSR itself is proud of this fact and told the then minister for Health in a 2017 strategic brief that the agency scheme “has a substantial deterrent effect”.

Of course, the 80/20 rule and other compliance matters within the remit of the PSR have exceptions, including one that would potentially have applied in Kitchen’s case for regional practitioners, if the PSR was willing to listen to the explanations.

The Federal Court found in his case that it did not.

The director of the Professional Services Review agency is bound by law to “take into account any submissions” made by a medical practitioner before forming an opinion as to whether they should be referred to a committee of their peers for adjudication.

On November 6, 2018, a case manager at the PSR forwarded Kitchen’s full submission – it was 96 pages long with 207 attachments – to the PSR director, Professor Quinlivan. That was at 4.05pm.

At precisely 4.22pm that same day, just 17 minutes later, the PSR director responded to the email stating she had made a decision to establish a committee to review Kitchen’s Medicare billing.

In February this year, Federal Court of Australia judge Berna Collier found that contrary to the Health Insurance Act “the first respondent did not take into account the applicant’s submission dated 29 October 2018 before making the referral to the second respondent under section 93 of the Act on 14 November 2018”.

As a result, all the cascading decisions that followed were null and void.

Kitchen could not have known at the time, because it was not disclosed to him, that the PSR had engaged a consulting ophthalmologist to review his records prior to his first meeting with Quinlivan and that the independent opinion of that practitioner was that there were “no substantive concerns” regarding eight of the 11 MBS items examined. The expert only queried three individual specialists’ attendances under two MBS items. The remaining item had already been resolved by this stage of the process.

Further, the PSR case manager and legal officer, Georgia O’Keefe, gave legal advice to the director which, according to Kitchen’s legal team, stated that the submission Quinlivan had not yet read “was extensive, and questioned the basis of the review and the concerns expressed in the Quinlivan August 2018 report”. It “provided evidence in support of his assertion that his practice exceeded the standard of practice of his peers” and that even if the agency pressed ahead, recovery of Medicare payments could “at best be achieved in only four of the 10 MBS items” that remained in scope.

In July this year, Kitchen launched proceedings in the Supreme Court of Queensland to sue the PSR director, Julie Quinlivan, for misfeasance in public office. He is relying on the above details to make his case.

Kitchen also alleges, in his amended statement of claim, that during the Federal Court case the defendant, Quinlivan, “submitted and maintained for almost two years … that she had taken Dr Kitchen’s 2018 submission into account and had thereby validly made the referral when she knew that was not the case”.

In doing so, he claims, the decision was an “intentional, or alternatively, a reckless misuse of her power” and that it was “high-handed, exhibited a cynical disregard for Dr Kitchen’s rights and constituted conscious wrongdoing in contumelious disregard of Dr Kitchen’s rights”.

Quinlivan’s amended defence documents state that she knew she could not validly exercise her powers under s.93 without first taking into account Kitchen’s 2018 submission but, contrary to the findings of the Federal Court, she insists she did in fact read it between November 2 and 4, days before it was provided to her by Ms O’Keefe.

“The defendant does not recall whether she was provided with the 207 attachments (which formed part of Dr Kitchen’s 2018 submission), or any of them or whether she read any of the attachments in full, in part, or at all,” the amended defence document says.

As to the particulars outlined above, and many others relied on by Kitchen, Quinlivan’s defence says, “that as a matter of law she is not required to plead to those” and “says further that she does not admit the matters particularised and nor does she admit their relevance to the establishment of a cause of action for misfeasance or any part of it”.

At all times, Quinlivan denies “that any of the alleged consequences (if they occurred) were as a result of the defendant having intended to cause those consequences … because she did not, and further denies that she acted maliciously, with reckless indifference or improperly in taking the action under s.93 of the Act”. The matter continues in the Supreme Court.

In September this year, the PSR recovered more than $900,000 from just six general, medical and nurse practitioners under the controversial negotiated agreements governed by section 92 of the Act.

No findings of wrongdoing were made ahead of these agreements, although in each case those involved had to admit wrongdoing and all bar one practitioner was banned from providing certain Medicare services for between six and 12 months, accruing further savings to the budget. In August, the PSR managed to recoup more than $1.8 million on top of recouping $1.3 million in July.

These agreements have been controversial since at least 2011, when a parliamentary inquiry heard from medical industry figures and union advisers that the process was “coercive”.

If doctors do not sign an agreement they move to a committee stage, set up with powers of compulsion and hearings similar to a court. Often, by this stage, practitioners haven’t even been told what they have done wrong beyond the suggestion of improper conduct based on a review of a handful of medical records and statistical analyses.

During Kitchen’s Federal Court matter, Services Australia attempted to claim it did not have a single document relating to the algorithm used to randomly select samples of Medicare lists for review. Nor could it say what computer program was used. Justice Collier ordered Medicare to hand over all relevant files.

In a separate case, in which Dr Anchita Karmakar ended up losing to the PSR, Judge John Logan was critical of the committee system.

“Ever since the mid-17th century when they decided to execute a king, there has been an antipathy for star chambers in systems of government of British heritage,” he said during hearings.

“It’s just axiomatic, isn’t it? And if one had to pick a description of this committee, it’s a star chamber for the medical profession, isn’t it?”

Counsel for the PSR said the system isn’t quite that bad – people are given the right to make submissions, for example.

“It has got much more benign trappings than James I gave to his body of inquisitors. That’s what you’re putting,” Logan responded. “And I would have to accept that, in all fairness. But it’s still – the antipathy is for closed inquisitorial forums.”

Richard Silver, a former partner in a national law firm and high-ranking director of legal services for the federal government, is now retired and until recently was a long-term patient of another doctor who has come to the attention of the PSR.

That process for the family GP began almost three years ago.

“When I had dealings with the PSR some years ago it was concerned, quite rightly, with doctors rorting the Medicare system by fraudulent claiming and overservicing,” Silver, who has acted for and against the PSR, tells The Saturday Paper.

“The agency would robustly prosecute its brief, but it was always fair and aware of model litigation principles which apply to all federal government agencies and their advisers. If a doctor had accurate and complete records, as determined by peer review, the PSR could not, and would not, take further action against that doctor.

“What I am seeing now is a PSR driven by a different agenda – lowering the costs of the Medicare system by enforcing service reduction on medical practitioners. This approach seems to me to ignore the clinical needs and necessary health outcomes of their patients.”

A spokesperson for the Department of Health has confirmed an independent review is under way into section 92 agreements, led by Australian National University administrative law expert Professor Robin Creyke.

“The process underpinning section 92 agreements is longstanding and robust. It is simply wrong to characterise it as extortionate,” the spokesperson said in a statement.

“However, as part of ongoing and constructive discussions with the Australian Medical Association about health provider compliance, the government agreed to a targeted review of the procedures and processes involved in section 92 agreements.”

Quinlivan tells The Saturday Paper she is “excited” by the review. “I think everyone was really keen for a review. The AMA were keen, certainly the agency was. Our legislation is 25 years old and there have been significant changes to practice,” she says.

“Particularly the role of corporate [medical providers] in influencing the individual behaviour [of doctors] is a really important thing. It is a significantly corporatised process now, there is a lot of offshore ownership.”

Quinlivan says the agency has no financial targets and it plays no role in the actual recovery of Medicare funds. Budget statement targets are about “ensuring we have an adequately functioning agency”.

“We don’t initiate work, we receive work. So the targets are there to ensure we are handling the work we receive,” she says. “Nobody is forced to accept a section 92 agreement.”

What started for Richard Silver as a personal defence of his long-time GP has now morphed into another bizarre episode in the operation of the PSR. Silver wrote to the agency to provide a reference for his GP at the beginning of the process “some years ago” and, after that happened, his patient files were among those “randomly selected” for production to the PSR.

“Both the doctor’s lawyers and I found this suspicious, but PSR insists my name was randomly generated and that my file was excluded from the process on the basis of a ‘known person’ policy,” Silver says.

By coincidence, however, he was a partner at the law firm now representing his former GP. And through that connection, Silver discovered his medical files were destroyed a full year after they were handed over to the PSR. They were destroyed only after he complained.

Quinlivan says the files were destroyed immediately and she never saw them.

This article was first published in the print edition of The Saturday Paper on Nov 20, 2021 as "Government ‘star chamber’ targets doctors".

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Rick Morton is The Saturday Paper’s senior reporter.