UC Medical Centers Accused of Fraudulent Insurance Claims

A whistle-blower lawsuit by two former University of California employees alleges that the university’s five medical centers--at UCLA, UC Irvine, UC San Diego, UC San Francisco and UC Davis--billed the government for millions of dollars in fraudulent insurance claims.

A former UC administrator and a medical resident allege that 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 $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 of California 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%.

Lundberg speculated that the suit might have been spurred by a recent highly publicized case: The University of Pennsylvania’s clinical practices 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 taken out.

One of the plaintiffs’ attorneys, Lisa Foster of San Diego, declined to discuss the case or even to acknowledge its existence.

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 as a plaintiff.

The whistle-blower lawsuit, filed in U.S. District Court in San Francisco in May, comes at a sensitive time for University of California medical centers.

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

Also, the legal action follows the indictment earlier this year of two former UC Irvine fertility specialists on mail fraud charges. In those criminal cases, federal officials allege that 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 charged only with the billing improprieties. Stone has pleaded not guilty, and Balmaceda has denied the charges.

And the suit arrives as UC medical centers come under scrutiny during a nationwide crackdown in Medicare billing, prompted by the Pennsylvania case. Lundberg confirmed that 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 hospital 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 inspector general.

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-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 said in their written “disclosure of material evidence” submitted, as required by law, to federal authorities.

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

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. 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.

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,” said spokeswoman Nadine Wilck.

The plaintiffs allege in the disclosure statement that they believe the improper billing “extends throughout the five UC Medical Centers to many departments within” them.

“In particular,” they allege, “in psychiatry, residents at UCSF, [UC Davis] and UCSD have informed [the whistle-blowers] that clinical faculty physicians rarely provide meaningful supervision. . . . In addition, residents in plastic surgery at UCLA make complaints about practices in their department that are virtually identical” to those at UC Irvine. At UCLA Medical Center, medical director Dr. Michael Karpf declined to comment, but issued a statement saying the center abides by Medicare policies.