O.C. Billings of Medicare Scrutinized

The U.S. Department of Justice is investigating the Orange County Health Care Agency for possible fraudulent Medicare billings in its mental health programs.

Officials at the county agency confirmed Monday that an investigation has been underway since at least mid-March and is being conducted by the U.S. attorney’s office in Santa Ana.

“It is about billing practices that have to do with the Medicare charges that were being billed under behavioral health,” agency Director Michael Schumacher said.

“We intend to fully cooperate with them,” he said. “At this point, it is only an investigation.”

Schumacher declined to provide details but said the county counsel’s office had met with Department of Justice lawyers. “I really don’t want to comment too much further,” he said.

Orange County Supervisor Cynthia P. Coad said the problem appears to involve computer billing code errors in which county officials submitted payments using codes for services that did not match Medicare codes. The error was pointed out by a software vendor, but it was not corrected, she said.

“It is serious. . . . [But] what the doctors were billing was legitimate,” Coad said Monday. “It sure could have been caught earlier.”

Distrust is so pervasive at the county Hall of Administration, where two supervisors last month voted to fire CEO Jan Mittermeier, that even the means used to tell the board members about the federal investigation sparked a new round of attacks over whether county staff members were manipulating supervisors on this issue and trying to downplay its seriousness.

Supervisors learned of the investigation about a month ago from Schumacher, who talked to them on the telephone individually or came to their offices on the fifth floor of the Hall of Administration, county spokeswoman Diane Thomas said.

Supervisor Todd Spitzer objected to the briefing method, saying it deliberately isolated board members and kept supervisors from deciding as a group how to handle the inquiry.

“I got a five- to seven-minute briefing on the phone,” Spitzer said. “To me, it is such a serious allegation that I am requesting a closed-session briefing on May 9 for the full Board of Supervisors.

“When the Department of Justice is expending resources to do a widespread investigation, I am going to take it very seriously,” he said.

Supervisor Chuck Smith said Schumacher talked to him about it, but he would not characterize it as a briefing.

“My reaction was we give them fullest cooperation and we will see what comes out of it,” he said.

Officials at the U.S. attorney’s office in Santa Ana did not return telephone calls seeking comment. Medicare officials at the U.S. Health Care Financing Administration in San Francisco, which oversees California, declined to comment.

Federal investigators have interviewed current and former employees in the last two months, employees at the health care agency said. In addition, auditors have visited the agency’s offices several times in the last six weeks. Federal investigators asked employees not to discuss their interviews.

The behavioral health division has a budget of $142 million for the fiscal year ending June 30, and about $543,000, or 0.4%, of the total mental health budget is expected to come from Medicare, Health Care Agency Chief Financial Officer Dave Riley said.

A similar investigation by the federal government into mental health billings by Ventura County was settled in August 1999, when that county agreed to repay $15.3 million in Medicare payments made to that county’s health department. The investigation and settlement covered reimbursements from 1990 to 1998.

In the Ventura County case, investigators alleged the county submitted Medicare claims with doctors’ names, allowing for a higher reimbursement rate, although the services actually were provided by social workers, psychologists and nurses.

The Orange County problem is likely to be much smaller because unlike Ventura County, Orange County does not operate its own hospital, and direct billings by the county to Medicare for mental health services are much lower, an official said.