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Systemic failures costing icare billions of dollars

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The report highlighted a medical practitioner charging for a caesarean anaesthetic for a man on workers compensation, which icare had then paid out. Other instances include doctors claiming more than $4000 for shoulder surgeries for patients who had knee injuries.

SIRA chief executive Carmel Donnelly said the findings indicated inadequate controls on one in four medical payments, compared with the global average of just 7 per cent.

“It is paramount that every dollar spent on healthcare delivers the right treatment, at the right time, so that injured people are supported to recover,” she said.

Peter McCarthy, retired actuary and former senior partner at EY, said if icare’s 25 per cent leakage was extrapolated across icare’s annual medical costs, it would add up to more than $200 million spent in error in the past year.

Peter McCarthy was a senior actuary for 35 years and is now speaking out about the wrongdoing and mismanagement in the workers' compensation system.

Peter McCarthy was a senior actuary for 35 years and is now speaking out about the wrongdoing and mismanagement in the workers’ compensation system. Credit:Wolter Peeters

“It reflects the mismanagement of the workers compensation scheme by icare,” he said.

Icare’s medical expenses have jumped almost 60 per cent since 2015 when its formation was passed into legislation. This increase is out of proportion with the number of new claims and out of step with increases in Medicare and private health insurance.

A blowout in medical expenses and a failure to detect the billing errors is the latest scandal to hit icare, which has so far cost the job of chief executive John Nagle, who revealed to an inquiry on August 3 that he was reported to the Independent Commission Against Corruption (ICAC) because of a failure to properly disclose an icare contract awarded to his wife.

Other scalps include the Treasurer Dominic Perrottet’s chief of staff Nigel Freitas, who resigned after it emerged that two of Mr Perrottet’s ministerial staff, including senior policy advisor, Ed Yap, a former US Republican operative, were paid by icare in breach of regulations.

The resignations follow an investigation by joint The Sydney Morning Herald, The Age and ABC’s Four Corners into icare, which uncovered serious mismanagement in the agency and revealed the regulator had “grave concerns” about its deteriorating financial position and plunging return to work rates.

The Synapse report into medical expenses found rampant overservicing by surgeons, including sending insurance agents bills that were then paid out by icare for treatments that fall outside the rules.

It uncovered $1.6 million was paid out for 4,926 surgeries that did not merit payments, and $4.8 million for 9,543 anesthetic claims that should not have been paid.

In one incident a claim was made twice for the removal of the same tumour. Other inappropriate expenses included X-rays, ultrasounds, CT scans and MRIs conducted on the same body part on the same day.

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The report said “doctors will continue to plead ignorance when under investigation for non-compliant billing (excluding cases of fraud) because they can.”

Australian Medical Association NSW President Danielle McMullen said that while doctors should take care to bill correctly, insurers should also have appropriate processes in place to ensure the correct item numbers were being applied.

“This would be a simple governance process for a competently run insurer,” Dr McMullen said.

Icare said the data in the Synapse review was “unverified” and blamed its ballooning health care bill on the high cost of treatment in NSW compared with other states as well as growth in the economy.

“Knee, shoulder and disc surgeries in NSW also cost close to twice as much as in Victoria,” an icare spokeswoman said.

“Regulatory and legislative changes are required to contain medical costs and support value-based care. Icare is already working on the aspects it can control.”

The Treasurer Dominic Perrottet was sent a copy of the independent report and a series of questions. In a statement he said icare had identified this as a problem in a submission to SIRA in November 2019 and had outlined a series of ways to address cost leakages and rising medical costs.

“It is important that unnecessary costs are driven out of the system to support injured workers and I welcome the fact that SIRA are working towards resolving these issues,” Mr Perrottet said.

The Herald and The Age can reveal that the NSW government, Treasury and icare have long been aware of the agency’s soaring medical expenses, caused by plunging return to work rates, overservicing, overcharging and errors in charging by medical practitioners.

As far back as April 2018, EY was commissioned to conduct a “Health Check” into icare, which was circulated to Treasury and SIRA, and raised a “red” risk rating icare’s deteriorating medical costs that required “near-term action.”

In December 2019 an independent report into the performance of icare by Janet Dore found that “the level of medical costs inflation experienced since the creation of icare is inconsistent with national trends and trends for other participants in the NSW scheme.”

Labor’s Finance spokesman Daniel Mookhey said the report showed icare was forking out millions for unnecessary medical expenses while it was underpaying injured workers.

“The Treasurer must explain why icare did nothing while dodgy doctors feasted on the money employers paid to help sick and injured workers,” he said.

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