UC to Pay $22.5 Million in Billing Fraud Settlement

The University of California agreed this week to pay $22.5 million in response to an audit by the U.S. Department of Health and Human Services Office of the Inspector General. The settlement effectively closed suits of two alleged False Claims Act violations brought against the university in 1996 and 1999 in Federal District Courts in San Francisco and Sacramento.

The suits alleged fraudulent billing procedures, claiming that the five UC medical school hospitals used incorrect coding procedures. Government-funded programs such as Medicare and Medi-Cal were allegedly billed incorrectly for procedures done by residents instead of teaching physicians.

John Lundberg, general deputy counsel for the UC Board of Regents, said there was no fraud.

“”There were certainly no damages, fines or penalties,”” Lundberg said.

The False Claims Act enables plaintiffs in a lawsuit to receive at least 15 percent of the recovered amount if the case is settled. In this situation, there was no payment from the university to the individuals who filed the suit.

In fact, Lundberg said that the 1996 San Francisco case will be dismissed entirely, being “”devoid of facts.””

The 1999 Sacramento case against UC Davis’ medical facility will also be dismissed, except for one claim charging the institution with falsely charging California’s government-funded health care provider, Medi-Cal. It is unknown whether the plaintiffs are receiving any of the compensation the government derived from the settlement.

The Office of General Counsel stated that the University of California “”came out rather well”” in this settlement, due to its “”high degree of compliance to begin with.””

In an audit including 500 patient charts, 7,000 entries, technical vocabulary and specialized billing codes, the charges centered around “”up-coding,”” or billing in such a way that inappropriately assesses the complexity of the services rendered, resulting in the care provider being overcharged for the procedures. Lundberg said the institutions were down-coding as much as they were up-coding, that the occurrence of both were both minimal, and that the hospital practices were close to accurate.

The Physicians at Teaching Hospitals initiative was started by the Office of the Inspector General to evaluate the billing practices of over 40 hospitals across the nation.

In 1995, as a result of the same audit, the University of Pennsylvania paid $30 million to the federal government for the violations of one hospital.

Public universities have also been hit. The University of Texas San Antonio paid a $17 million settlement, again for only one hospital.

The UCSD School of Medicine spent $3.5 million during the course of the investigation, according to sources within the medical school.

The UC system spent approximately $15 million in professional fees during the course of the audit.

The motivation for this settlement was economic, as running out the litigation would have cost millions more than the $22.5 million paid as a result of the settlement.

According to Lundberg, the real savings was time. Attempting to settle the matter in court would have been “”a long, protracted litigation,”” he said.

Following the audit, the UC schools have implemented compliance plans that call for specialized officers on each campus, a committee to deal with potential violations, and education programs designed to increase awareness of proper accounting procedures. This increase in oversight aims to bring the hospitals into further compliance with federal regulations.

Lundberg cited the clearer regulations put in place in 1996 as enabling the university to implement effective plans for financial accountability.