Recent False Claims Act Case Involving Hospitalists’ Services Includes Allegations that Company’s Compliance Program and Corporate Officers Had Knowledge of Upcoding
On Monday, June 16, 2014, the U.S. Department of Justice (DOJ) filed a complaint intervening in a whistleblower’s suit under the False Claims Act, 31 U.S.C. § 3730(b)(1), against IPC The Hospitalist Company, Inc. and its subsidiaries (IPC) in U. S. District Court for the Northern District of Illinois. The DOJ’s complaint alleges that IPC violated the federal False Claims Act by knowingly and systematically submitting claims to federal payors for higher and more expensive levels of medical service than were actually performed.
IPC employs approximately 2,500 hospitalists in 28 states according to the DOJ complaint. The whistleblower was an IPC hospitalist who worked in a Texas hospital from 2003 through 2009. The DOJ’s complaint in intervention alleges that from January 1, 2003 through the present that IPC and its affiliates and subsidiaries routinely and systematically billed federal payors for upcoded claims for E&M and other services. The DOJ previously filed a notice of its intention to intervene when the whistleblower’s lawsuit was unsealed last December.
This case is important for several reasons, besides the DOJ’s decision to intervene in the case. An interesting aspect is the focus on hospital services by hospitalists, and the DOJ’s allegations in its complaint that IPC’s corporate culture and pressure from IPC management resulted in IPC hospitalists routinely submitting upcoded claims. Hospitals and other providers should also take note of the allegations in the complaint that IPC’s compliance department and corporate officers had knowledge of the upcoding and failed to take reasonable steps to investigate whether false claims were being submitted to federal payors.
Department of Justice’s Complaint
The DOJ’s complaint included several allegations that IPC’s corporate culture and management of its hospitalists’ services encouraged IPC hospitalists to maximize their billings and increase corporate revenue, and as a result systematically submit upcoded claims to federal payors. The following are some of the key allegations described in the DOJ’s complaint intervening in this whistleblower suit against IPC:
• IPC’s compensation structure encouraged IPC hospitalists to maximize their billings.
IPC hospitalists are paid a base salary and a bonus based on the amount billed for a hospitalist’s services. An IPC hospitalists’ bonus may equal or exceed his or her base salary. According to the complaint, IPC calculates the total amount billed by each hospitalist on a monthly basis, and subtracts from that amount the cost of the hospitalist’s base salary and benefits. IPC would pay each hospitalist a bonus of 70% of the amount that the billings by a hospitalist exceeded the monthly amount of their salary and benefits.
• IPC encourages its hospitalists to maximize their billings through peer pressure and IPC’s corporate culture of ‘looking the other way’.
The complaint alleges that the personal billing performance of each IPC hospitalist was regularly reviewed in practice area meetings, and was compared to their peers as well as hospitalists were ranked against each other based on their individual billings. In addition, the complaint alleges that low-billing hospitalists were pressured to use more complex billing codes that reimburse at higher rates and increase their net revenue per patient encounter.
The complaint also alleged that IPC hospitalists are encouraged to excessively and improperly bill the highest level billing codes by IPC’s corporate culture of “looking the other way” and that there was no incentive to use appropriate billing codes. These comments on IPC’s corporate culture appear to be based on IPC’s corporate officers and compliance department having reports (described below) of billing patterns that were significantly higher than national norms for other non-IPC hospitalists.
• IPC’s compliance department and corporate officers were aware of ‘red flags’ that IPC hospitalists were submitting upcoded claims.
The DOJ’s complaint alleges that internally generated reports regarding billing trends and patterns for individual IPC hospitalists were used to pressure hospitalists to meet IPC’s ‘revenue per encounter goals’. IPC used a proprietary management hospitalist technology called IPC–Link® to monitor activities of each of its physicians on a real-time basis, including patient volumes and physician productivity, referral sources and trends, physician billings, clinical quality indicators, patient satisfaction, and patient post-discharge survey results.
The complaint alleged that the internal reports created through IPC-Link included documents in which individual IPC hospitalist were “red-flagged” for falling below IPC’s revenue per encounter targets. In the complaint, the DOJ notes that the only other metric provided in these reports, besides a hospitalist missing their revenue per encounter targets was the rate at which the hospitalist had billed the highest level admission and subsequent hospital care codes.
The complaint also alleges that IPC’s compliance department relied on an internally created ‘dashboard’ report to identify hospitalists whose billing required scrutiny for potential upcoding (i.e., billing for services in excess of what was actually rendered) and potential undercoding. The complaint specifically alleges that IPC’s medical affairs committee, which included IPC’s Chief Compliance Officer, knew that despite having knowledge of national averages for use of CPT code 99223 and CPT code 99233 for E&M services by hospitalists, IPC ensured that it would not be alerted to potentially false and fraudulent billing by its hospitalists by not setting a dashboard flag for excessive billing of CPT codes 99223 and 99233.
In addition, the complaint alleges that although IPC’s compliance personnel have been aware from 2003 through today of a ‘huge disparity’ between its hospitalists’ utilization of the highest level CPT codes for E&M services as compared to national average utilization rates, and that IPC continued to consistently encourage its hospitalists to bill the highest codes at rates far exceeding national norms for non-IPC hospitalists.
• Comparisons of a Physician’s billing patterns prior to joining IPC and medical record audits reflect IPC’s culture and expectations encouraged false billing practices.
The DOJ’s complaint also includes descriptions of a comparison of billing records of some hospitalists of services they rendered before becoming employed by IPC as examples of how IPC’s corporate culture encouraged false billing practices. The complaint alleges that after the newly acquired hospitalists were exposed to IPC’s corporate culture of maximizing billing that these same hospitalist billing practices changed dramatically. The complaint alleges that the combined billing records for several newly employed IPC hospitalists’ shows a dramatic increase in the use of higher level of CPT codes from the time the hospitalists started at IPC as compared to several months after working for IPC.
The complaint also includes several examples of claims that neither the documentation created by IPC’s hospitalists or any other information recorded in patient medical records support the highest level of initial hospital care billed to Medicare. The complaint also includes several examples of upcoding in which IPC hospitalists were allegedly billing for services performed in one day that would have taken in excess of 24 hours to complete.
• IPC knew or acted in reckless disregard of warnings by a Medicare Administrative Contractor that its hospitalists were routinely submitting claims for upcoded claims.
The complaint noted that Trail Blazer Health Enterpriser, the Medicare Administrative Contractor for the State of Texas, issued approximately 230 separate provider educational audit letters to IPC hospitalist in Texas that identifying billing patterns indicating substantial deviations from the national norms and/or documenting actual upcoding of CPT codes based on audits of IPC hospitalist claims. The complaint noted that between January 1, 2005 and September 19, 2006, nearly every hospitalist working for IPC in Texas received a letter from Trail Blazer identifying potential or actual upcoding in the claims IPC had submitted for E&M CPT codes, particular focusing on claims for hospital admission and subsequent hospital visits.
The DOJ commented in its complaint that IPC directed its hospitalists to disregard Trailblazer’s provider education and audit activity and to continue billing the highest level E&M CPT codes, instead of taking appropriate steps to address the issues in Trailblazer’s provider education letters.
This will be an interesting case to following for several reasons, including whether the allegations that the IPC compliance department failed to affirmatively take actions to identify and prevent false claims being submitted to federal payors supports the government’s and whistleblower’s claims under the False Claims Act. Other potential lessons include the use of national averages for reviewing billing codes by providers, and using audits and related information from Medicare contractors as part of a provider’s compliance program and on-going training.
A copy of the DOJ Press Release on this case is located at: www.justice.gov4/uso4/iln4/pr4/chicago4/2014/pr0617_01.html
DOJ Complaint Allegations
• Norms Comparison
• Prior Billing Records
• Importance of internal audits
• Track and respond to MAC and other contractor reviews and information
• Demonstrate actions in response to potential indicators of false claims or upcoding issues