Some familiar with the often convoluted workings of Medicare caution against a rush to judgment on recent fraud charges against three Columbia/HCA executives.

They say the policies of the Health Care Financing Administration, the federal body that runs Medicare, played a hand in the matter. Also, complying with Medicare's 45,000 pages of regulations can be tricky.

• For the past 13 years, Medicare has been ratcheting down hospital reimbursements -- knowing that its payments don't cover hospital costs.

• Hospitals made up the difference by "cost shifting" -- adding the costs to patients covered by private insurance, analysts report.

• Some hospitals recoup their Medicare losses by emphasizing services that are reimbursed most generously, or they "upcode" cheaper ailments to more lucrative ones.

• A study in the Journal of the American Medical Association of a random sample of Medicare admissions in 1988 found that billing errors in which the government was overcharged were almost exactly offset by errors in which it was undercharged.

Desperate private insurers and HMOs have reportedly adopted the government's payment schedules in a bid to shift back to Medicare the costs that Medicare has shifted to them. The latest data, for 1994, show Medicare actually paid 97 cents on the dollar, a record, while private clients paid $1.24 on the dollar.

Source: Holman W. Jenkins Jr., "Who's Scamming Whom?" Wall Street Journal, August 5, 1997.