Medicare Fraud Case Called Warning to Others

A $15.3-million levy against Ventura County for overbilling a government health care program is a warning that fraud investigators will go after any health provider--public or private--that cheats the government, prosecutors said Friday.

In their first comments on a federal lawsuit, prosecutors said the county hospital systematically overbilled Medicare for nearly a decade, submitting claims for outpatient mental health care approved by a psychiatrist when a doctor never saw the patient.

Services were instead provided by lower-paid employees, such as nurses or occupational therapists, with the county reaping higher payments by claiming a doctor was supervising care. The practice continued for nearly a decade until a county psychiatrist alerted the government to irregularities in a whistle-blower’s lawsuit filed last year.

“If you are going to bill us, and bill us a lot, you better follow the rules,” said Assistant U.S. Atty. Wendy Weiss, chief prosecutor in the civil fraud case officially unsealed late Thursday. “If I were standing in the shoes of county hospital administrators, my first step would be to make sure they are doing everything they can to make certain they don’t find themselves in Ventura County’s position.”

Ventura County admitted no wrongdoing under the settlement. County officials have said that the improper billings were inadvertent.

“We may owe the money because we didn’t keep the records right, but there was no fraud,” County Counsel James McBride said. “The reality is that the laws are so complex that probably in every system there is a problem.”

State regulators say they, too, will keep closer tabs on health care programs run by counties as a result of the Ventura County lawsuit.

“It’s a wake-up call that we need to be ever-vigilant,” said Gary Pettigrew, deputy director of the state Department of Mental Health, which conducted its own inquiry of Ventura County’s mental health system. “Even though we have programs that we think operate very effectively, it doesn’t mean we should drop oversight.”

Government leaders across the state have closely tracked the lawsuit--believed to be the first successfully brought against a California county under the federal False Claims Act--after details of the sealed claim leaked out earlier this year.

Ventura County supervisors entered into a five-year “integrity agreement” as part of the settlement. Details of the agreement were unsealed this week after prosecutors and attorneys for the county worked out final details.

The pact requires the county to report to federal officials on its progress in cleaning up billing procedures, and mandates extensive training for employees who do billings.

The county also agreed to appoint an officer and a committee charged with ensuring that all requirements are followed and that senior managers are following a mandatory code of conduct. A hotline to report health care fraud will be established.

Carrying out the controls will add millions of dollars to the $15.3-million settlement cost, county administrators say. The county will pay the settlement amount over five years.

Claims Didn’t Meet Requirements

County supervisors agreed to a settlement of the civil suit this summer after an audit showed that all claims filed during a two-year period did not include a treatment plan signed by a physician, a prerequisite for Medicare reimbursement.

The audit showed that virtually every claim contained other errors that would have disqualified the billings for reimbursement.

Additionally, the county hospital randomly selected staff psychiatrists’ Medicare provider numbers and included them on bills submitted to the program, when the physician had not provided or supervised care, prosecutors said.

Although it appears that no one personally profited from the scheme, the inflated billings increased the amount of revenue flowing into the county’s treasury. Weiss said she questions why no one in the county caught the problems earlier.

“When someone has 100% of their billings wrong, it’s hard not to consider that someone should have known,” Weiss said. “You have auditors, billing experts, administrators. You’d think someone should have known.”

A criminal probe is underway by the FBI to determine if any administrators broke the law. An initial inquiry did not spur charges, but investigators are continuing to ask questions. The Ventura County Grand Jury is also looking into the billing scandal.

Ventura County’s financial hardship is a “scary, cautionary tale” of how quickly politics can devastate a public health care system once held up as a model for the state, said Marvin Southard, Los Angeles County’s mental health chief.

Political fights in the county’s Health Care Agency led to an ill-fated merger of its mental health and welfare departments. Psychiatrists vehemently opposed the merger, believing it would weaken their ability to treat mental illnesses as primarily a medical problem.

Dr. Jerome Lance, a veteran psychiatrist, filed a whistle-blower lawsuit five months after the merger, alerting authorities to billing irregularities.

“This was an unnecessary tragedy,” Southard said. “The genesis of the problem was a dispute in the county family. . .If that had been managed successfully, none of the aftereffects would have occurred.”

Fallout Continues

Those ripples so far have included the federal payout, the potential loss of millions more in state funding as a result of another audit and a year of chaos in the county’s Health Care Agency. Employees and managers are still distrustful of each other, and employees in the Behavioral Health Department are leaving in large numbers.

“It’s been so sad to watch,” Southard said. “But we’ve learned a lot from Ventura. The lesson is: Build consensus, don’t get into internal fights and don’t rest on your laurels but continue to improve your services.”

Lance will get about $2 million as his share of the settlement. Lance and other county psychiatrists felt that county officials were ignoring psychiatrists’ concerns that medical care was suffering under the county’s team-based approach to providing mental health services.

“The merger was the last straw,” said Phillip E. Benson, an Orange County attorney representing Lance. “He was a little reluctant about filing a lawsuit. But he came to the conclusion that the best way to disrupt a corrupt system was to file the suit.”

Ventura County’s mental health department has been nationally recognized for creating a team-based approach to providing services. The so-called Systems of Care model calls for teams of psychiatrists, psychologists, nurses and social workers to collaborate on treatment.

California has adopted the program for children’s mental health services in 42 counties and is attempting to expand it into programs for mentally ill adults. Some mental health leaders worry Ventura County’s problems with the federal government will put a black mark on the program, making it harder to lobby for needed expansion funds.

But Pettigrew of the state Department of Mental Health disagrees, saying Ventura County’s billing problems are unique to this county. Ventura County billed all of its Medicare services through its hospital, a structure that brought higher reimbursements but required physician supervision of services.

Other counties switched to community-based clinics in 1993, an option that provides more flexibility in billing, Pettigrew said.

“Ventura is the only county that chose to bill” through its hospital, he said. “But other counties have been watching Ventura County closely because this does reinforce the need to ensure quality of claiming.”

Medicare fraud has been a priority of the Clinton administration, which shifted $2 billion to agencies involved in investigating and prosecuting fraud.

The number of health fraud cases filed under the federal False Claims Act soared from 33 in 1987 to 483 this year, according to Justice Department figures.

Total recoveries in whistle-blower lawsuits exceed $458 million for this year alone. However, the vast majority of cases in recent years have involved private health care providers.

It is rare to have a public entity as the focus of an investigation, Weiss said.

“It’s unlikely that a government would be going after another government,” the prosecutor said. “However, with the evidence that we compiled, we had no choice.”