UC to Pay $22.5 Million in Medicare Investigation

The University of California has agreed to pay $22.5 million to settle allegations that physicians at teaching hospitals at UCLA and four other campuses overbilled the government in filing Medicare claims, officials announced Friday.

The U.S. attorney’s office said the payment was to compensate for overcharges for physician services at the medical centers between 1994 and 1998.

The university denied any wrongdoing in the 13-page settlement. UC officials said they agreed to the settlement only to avoid prolonged and costly litigation after spending about $15 million on auditors and defense attorneys during the four-year federal investigation.

“If these audits showed that physicians were ripping off the taxpayers, that would be one thing,” said George Terwilliger, UC’s defense attorney. “But in fact, the audit results showed just the opposite. The level of physician compliance with these vague and difficult regulations was remarkably high.”

The settlement is among the largest under a national crackdown by the U.S. Department of Health and Human Services on teaching hospitals that allegedly billed the government for faculty physicians’ services when medical residents actually did the work.

All told, the department’s office of inspector general has brought in $98.7 million, including $30 million--the largest single settlement--from the University of Pennsylvania’s clinical practices division.

UC’s five medical centers have 30 days to pay the $22.5 million.

UCLA Medical Center--which has struggled of late to remain in the black--owes the largest share, $8.5 million, because it has the greatest volume of Medicare services. Officials there said the financial burden will be spread among sixteen clinical departments.

UC Irvine will pay $4.1 million, UC San Diego and UC San Francisco will each pay $3.7 million and UC Davis will pay $2.5 million. In some cases, the money will come from reserves in the physician practice plans. In others, it will be covered by general operating revenues.

Federal auditors have probed the books of about 40 of the nation’s 125 teaching hospitals. About 20 of those investigations continue, but department officials said they are beginning to wind down the Physicians at Teaching Hospitals initiative.

“Some of them we have to close down because the [legal] guidance wasn’t clear,” said Judy Holtz, of the office of inspector general. “Some of them we have not pursued for other reasons.”

The audits have been widely criticized by the nation’s university hospitals, which have seen federal payments and other sources of revenue shrink under belt-tightening to rein in health care costs.

At one point, the Assn. of American Medical Colleges sued the government over the fairness of the audits, complaining of “the federal government’s vague, inconsistent and poorly communicated rules concerning when teaching physicians could appropriately bill Medicare and how their services should be documented.”

The University of California was targeted by this national initiative when former UC employees filed two separate whistle-blower lawsuits in federal court.

The suits alleged that UC’s medical centers fraudulently billed Medicare, Medi-Cal and other government-funded insurance programs for medical services performed or supervised by faculty physicians. In actuality, the suits charged, the procedures were performed by residents with little or no supervision.

The settlement unveiled Friday by the U.S. attorney’s office in San Francisco states that both those lawsuits will be dismissed within 10 days of receiving UC’s payment.

Federal officials have yet to decide whether the whistle-blowers are entitled to any share of the settlement, as is often allowed under the federal False Claims Act.

Tipped off by the lawsuits, federal auditors began by pulling 100 files at each of the five medical centers. They focused on insurance claims by faculty physicians who did not personally perform the services between 1994 and 1998. They also zeroed in on any claims that failed to use proper insurance codes.

Initially, the office of inspector general demanded that the university pay more than $200 million, said John Lundberg, UC’s deputy general counsel.

In the end, the federal government accepted a much smaller settlement, he said, because its auditors turned up nothing to substantiate the whistle-blowers’ allegations of widespread abuse or other significant problems.

“Of course, everybody has a bad actor or two,” Lundberg said. “But their investigation was misplaced because they found no fraud.”

UC officials chalked up most of the discrepancies to arcane rules and to the give-and-take that comes with billing hundreds of millions of dollars a year in medical care.

Mostly, they complained that the audits were a financial drain and a distraction for the university’s medical centers that tackle the hardest medical cases and train the majority of California’s doctors.

Howard Daniels, a health care attorney who has defended hospitals involved in similar actions, was sympathetic to UC’s four-year struggle.

“These hospitals got caught between a very ambiguous regulation that the government had never clarified before, and the possibility of being excluded from Medicare,” Daniels said. “So they really have not much choice but to settle. You can’t even assume from the dollar mount that they even did anything wrong.”

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Times health writer Sharon Bernstein contributed to this story.