UCI a Key Target in Suit Alleging Billing Fraud

UC Irvine is a major target in a whistle-blower lawsuit alleging the University of California’s five medical centers overbilled the government by filing “millions of dollars” in false insurance claims, legal records show.

A former UC administrator and a medical resident allege the medical centers routinely billed Medicare, Medi-Cal and other government programs for faculty physicians’ services when medical residents actually did the work, according to the confidential suit obtained by The Times.

The billing practices caused inflated payments to the medical centers, which netted at least $700 million from government health-insurance programs in the last fiscal year, according to the lawsuit and supporting documents.

“By reason of these payments, the federal and state governments have been damaged, and continue to be damaged, in the amount of millions of dollars,” the suit alleges.

University attorney John Lundberg said he had not seen the suit but suggested this week that the plaintiffs themselves are fishing for profits. Federal law provides that whistle-blowers on government programs share in any damage award or settlement, collecting up to 25% of what is recovered.

Lundberg speculated that the suit, filed in May, might have been spurred by a recent, highly publicized case: The University of Pennsylvania’s clinical practice division in December agreed to repay $30 million to the government to settle Medicare overbilling allegations. Federal authorities have declined to comment on whether that case stemmed from a whistle-blower complaint.

“I think that the knowledge of what came out of the University of Pennsylvania litigation prompted some plaintiffs’ attorneys, in search of money, to bring an action,” Lundberg said.

The names of the UC whistle-blowers, which are under seal, were removed in the documents obtained by The Times; other portions of the documents also were redacted.

One of the plaintiffs’ attorneys, Lisa Foster of San Diego, declined to discuss the case or even to acknowledge one existed. Foster’s office handles nothing but such whistle-blower cases and helped write the most current version of the federal law that governs them.

Such suits remain under seal--and are not served on defendants--while the U.S. attorney’s office investigates the claims to determine whether the federal government should join in the case as a plaintiff. The whistle-blowers, for now, are filing as individuals on behalf of the federal government.

The whistle-blower lawsuit comes at a sensitive time for University of California medical centers.

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Three centers--Irvine, San Francisco and San Diego--are in serious financial distress, facing cuts in Medicare and Medi--Cal and fierce competition from the managed-care industry.

In addition, the legal action follows the indictment earlier this year of two former UCI fertility specialists on mail fraud charges. In those criminal cases, federal officials claim the faculty physicians, Drs. Jose P. Balmaceda and Sergio C. Stone, repeatedly billed for services actually performed by others, including medical residents and interns.

The pair are under investigation in a human-egg stealing scandal but have been publicly charged only with the billing improprieties, described by some attorneys as the easiest to prosecute. Stone has pleaded not guilty and Balmaceda, who has left the country, has denied the charges.

Finally, the suit arrives as UC medical centers come under scrutiny during a nationwide crackdown on Medicare billing, prompted by the Pennsylvania case. Lundberg confirmed he recently received word from federal officials that all five UC medical centers will be audited as part of a comprehensive federal review.

Originally, only the San Diego campus was to be audited, but the scope was broadened. The audit is under the auspices of the U.S. Department of Health and Human Services, office of the inspector general, although other state and federal agencies probably will be involved.

Judy Holtz, a spokeswoman for that office, said all 125 of the nation’s medical centers that operate medical schools will be audited in coming years. The order in which they are audited is random, she said.

The whistle-blower suit, filed in U.S. District Court in San Francisco, refers to alleged improprieties at the medical centers operated by the Irvine, Davis, San Francisco, Los Angeles and San Diego campuses. Only the UC Board of Regents, the university’s governing body, is named as a defendant.

But the whistle-blowers focus primarily on alleged improprieties at UC Irvine Medical Center, calling them “illustrative” of wider problems. Evidence of fraud “throughout UCI Medical Center is overwhelming,” the plaintiffs assert in their written “disclosure of material evidence,” submitted, as required by law, to federal authorities.

In the disclosure statement, the plaintiffs claim faculty physicians are “simply not present” and are “unavailable” in the emergency department, and psychiatry residents routinely do consultations throughout the hospital, and run outpatient clinics, without supervision. Medical residents are physicians in training.

Yet, according to the statement, bills are prepared as though the faculty physicians personally handled the cases.

The documents, which are confidential, also allege improper billings in the plastic surgery, anesthesiology and otolaryngology (ear, nose and throat) departments. Faculty doctors would routinely disappear from surgeries, “supervise” two or three surgeries at a time or see private patients while they were supposedly supervising surgeries, the statement alleges.

The billing practices are significant because they can boost Medicare payments. Residents’ salaries are relatively low and fixed; adding faculty physicians’ services inflates the bill.

UC Irvine officials, who have not seen the suit or disclosure statement, declined comment. “There’s a real reluctance to comment on something so intangible at this time,” spokeswoman Nadine Wilck said.

At UCLA Medical Center, Medical Director Dr. Michael Karpf also declined comment, but issued a statement saying UCLA abides by Medicare policies.

The suit seeks three times the amount of the alleged damages, which are not specified, plus $10,000 in fines for each violation.

Issues raised in the lawsuit and disclosure statement closely parallel those in the Pennsylvania case. In that instance, inspectors contended there often was no documentation that faculty physicians were present when residents performed services at the teaching hospital. In addition, inspectors alleged, a significant number of services were billed at a higher level of care than was supported by medical records.

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The UC whistle-blowers’ disclosure statement alleges that, in the UCI psychiatry clinic, “the clinical faculty physician may not even be present in the building.” In the hospital, some psychiatry patients “never [were] seen by a clinical faculty physician during their stay,” the statement alleges, and faculty physicians would co-sign stacks of charts without ever seeing the patients to whom they pertained.

Residents would provide all psychiatric services in the geriatric clinic, even though some are not yet licensed physicians, the statement alleges.

Alleged violations in plastic surgery were described in the statement as “particularly egregious.” Doctors there would bill for multiple surgeries a day, sometimes without even being present at the surgery or providing any meaningful supervision of the residents who did the work, according to the statement.

The statement alleges one doctor was “in and out” during surgeries and left one procedure three hours before it was completed, according to the statement.

In anesthesiology, described as apparently “rife with billing improprieties,” faculty physicians sometimes would leave patients in the hands of residents and even nurse anesthetists, the statement alleges. In otolaryngology, faculty physicians are alleged to have “double- and triple-scheduled” surgeries and “float[ed] between operating rooms, attempting to supervise two or three surgeries at the same time.”

“Virtually all of these services were billed to Medicare, Medi-Cal and other government health insurance programs under the names of clinical faculty physicians,” the statement alleges.

Lundberg and advocates for teaching hospitals argue that the law, until recently, was unclear about billing requirements for faculty physicians. Only last month, federal health-care officials issued regulations clarifying that a physician must be present, except in very narrow circumstances, to bill for services, Lundberg and others said.

“This is an extremely ambiguous set of regulations that we’re dealing with, which has been subject to a multiplicity of interpretations over time,” Lundberg said.

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Ivy Baer, regulatory attorney for the Assn. of American Medical Colleges, said the rules, since 1969, have been clear that faculty physicians must be present during surgery and other complex procedures in order to bill for their services. But “for everything else, the clarity just was not there,” she said.

“Now [with the new regulations] there is no room to wiggle about,” she said. But “this is a prospective rule. What is made clear now does not apply retroactively.”

The University of Pennsylvania settlement has struck fear among medical center administrators nationwide. Many see it as a blatant warning to every institution to tighten billing procedures--or else.

The nationwide review of billing practices at academic medical centers is what federal health inspectors are calling “phase two” of their crackdown, after the phase one University of Pennsylvania audit. The UC medical centers have been tapped for audit in this phase.

Medical centers have the option of entering an alternative program, called PATH--for Physicians at Teaching Hospitals--in which they agree to be reviewed by outside auditors and to waive any rights to withhold documents in exchange for possible “favorable treatment” (possibly lower financial and legal penalties).

UC San Diego is now considering whether to submit to the federal audit or to enter the PATH program, said Dr. Charles Mittman, UCSD’s dean for clinical affairs.

He has been told the federal audit would take a minimum of six months, and entail a review of randomly selected patient records and bills.