UW officials missed opportunity to head off medical overbilling

Audits conducted in the mid-1990s show that University of Washington medical-school officials missed a key opportunity to detect widespread overbilling of Medicare and Medicaid before a federal criminal investigation that resulted in a $35 million penalty.

The audits came in 1996 and 1997, two years before a whistle-blower's lawsuit sparked the federal inquiry. The findings revealed that doctors might be routinely billing Medicare and Medicaid on days they were absent.

Auditors identified 2,800 cases of questionable billing by doctors in 14 departments at the medical school. School officials were able to explain most of the cases, but they eliminated 600 from further investigation on the theory that doctors often work "nutty hours" and frequently don't take the first or last days of their scheduled vacations.

Ultimately, the whistle-blower's 1999 suit led to the felony convictions of two doctors and prompted the university to pay a record $35 million civil penalty to the federal government for overbilling Medicare and Medicaid.

The audits were conducted during a period when medical-school officials received other warning signs about billing problems, including red flags raised in documents sent to UW Medical School Dean Paul Ramsey.

Disclosure of the audits comes as an independent review panel prepares a report on what lessons might be learned from the billing scandal.

The audits, kept secret since 1997, were obtained by The Seattle Times last week under a public-disclosure request. The university initially denied the request, citing attorney-client privilege because a law firm was involved in arranging the audits.

UW President Mark Emmert reversed the decision when The Times appealed.

The audits were not provided to federal prosecutors during their investigation, again because the university cited attorney-client privilege.

The review panel recently was provided the audits, which were commissioned in 1996 by University of Washington Physicians (UWP), the billing arm for UW doctors. The audit request came after the University of Pennsylvania paid a then-record $30 million penalty to settle billing irregularities involving Medicare and Medicaid.

The UW also wanted to assess its compliance programs at a time when the federal government was altering its billing rules and UWP was adopting new practices to bolster its compliance program, officials said last week.

The audits, which were performed by the accounting firm Arthur Andersen, initially revealed the 2,800 cases in which doctors had billed for services on days they were absent.

Auditors trimmed 1,400 cases from the list after determining that the billing dates didn't accurately reflect when the doctor had actually performed the work.

For example, electrocardiograms were billed on the day they were administered by technicians, even though doctors reviewed the results days later, said Margaret Peyton, general counsel for UW Physicians.

After the list was winnowed to about 1,400, 600 more cases were eliminated if a billing date fell on the first or last day of a doctor's vacation, on the theory that doctors often don't begin or end their vacation or other days off as scheduled, Peyton said.

Doctors' calendars are "notoriously unreliable," Peyton said, adding that a physician might perform surgery hours before leaving on vacation, or might return early to work to treat a patient.

"They keep nutty hours," she said.

But neither the auditors nor the university interviewed doctors to determine if they were, in fact, absent on the days listed in the audits.

Of about 800 remaining cases, about 775 were traced to the radiation oncology department, where cancer patients are treated.

Further examination revealed that one doctor in that department would routinely bill for an entire physician group involved in a treatment program. The billing system tracked patient services by the name of the doctor who designed the treatment program for that patient, rather than by those who actually provided the treatments on subsequent dates.

No overbilling occurred as a result of that practice, but procedures were changed to end the confusion, UW officials said.

The review did show some billing errors, and the university refunded $61,000 to the government, although not until 2001.

By then, federal agents had served search warrants and subpoenas on the medical school as part of a criminal investigation.

The 42 remaining cases identified in the audits came from cardiology, dermatology, endocrinology, internal medicine and three other departments. Those cases were not investigated, Peyton said.

"Today, that's not how we would approach it," she said, noting a thorough investigation of all the results would be conducted under changes adopted in the aftermath of the billing scandal.

Ramsey, who was named dean of the medical school in May 1997, was briefed in 1998 about the problems in radiation oncology, but it is unclear if he was told the full scope of the audit findings, university officials said.

Throughout the 1990s, UW doctors and staff in various departments warned medical-school officials in writing that overbilling was commonplace.

In 1996, the head of the kidney-dialysis department, William Couser, wrote in a wide-ranging memo to Ramsey, then chairman of the Department of Medicine, that doctors in his department had billed for dialysis even if a doctor wasn't present. Ramsey later said through an attorney that he didn't recall the memo.

Couser pleaded guilty in 2003 to submitting a false bill to a private provider and admitted he had billed the government $100,000 for dialysis treatments when he wasn't present.

In 1998, Ramsey received a letter from a UW doctor pointedly warning him that physicians were falsifying Medicare bills. Ramsey ordered an investigation that found no wrongdoing, although a written report wasn't produced until after the criminal investigation began in late 1999.

UW attorney Dan Dubitzky said last week that those signs at the time were disparate warnings that were never proved.

None of them suggest Ramsey should have been aware of wider problems, Dubitzky said.

"Adding a bunch of zeroes together," he said, doesn't prove anything.

Steve Miletich: 206-464-3302 or smiletich@seattletimes.com

Sharon Pian Chan: 206-464-2958 or schan@seattletimes.com