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Medical billing a target of fraud investigations

In Maryland, an orthopedic practice agreed to pay $2.5 million to the federal government to settle allegations that it had billed for patients' visits that never took place and had double-charged for X-ray work to get higher reimbursements. In Connecticut, a health care facility paid nearly a half-million dollars to the federal government in a similar settlement over allegations that it had exaggerated costs associated with a prostate cancer treatment.

Those allegations, and another leveled recently at a Baltimore-area hospital, have highlighted an arcane record-keeping practice called "upcoding."

The practice — giving a patient a more severe diagnosis to receive higher reimbursement — is a target in the federal government's push to root out billions of dollars a year in health care fraud. And investigators are using increasingly sophisticated software to detect questionable billing patterns in Maryland and across the country.

The U.S. Justice Department has accused a rehabilitation hospital owned by the University of Maryland Medical System of purposely misdiagnosing patients with severe cases of malnutrition and is suing for $8.1 million. The medical system denies the allegations and is fighting the case.

As the government uses more high-tech tools to identify problems, defendants such as the University of Maryland Medical System say unusual coding patterns are sometimes simply mistakes or misunderstandings, rather than fraud.

The lawsuit filed in October accused Kernan Orthopedics and Rehabilitation of manipulating its computerized billing system to make it look like patients had a severe form of malnutrition called kwashiorkor. This enabled the hospital to get bigger payouts from Medicare and other government health programs, the lawsuit said.

But the medical system's CEO, Robert Chrencik, said in his first comments about the case that none of the patients' records showed a diagnosis of kwashiorkor. Instead, he said the disease shares a computer coding with another nutritional disorder, "protein deficiency," which some Kernan patients do have.

He said a recent change in the coding system made it appear that the number of patients with the nutritional deficiency had drastically increased at Kernan, when it hadn't. The medical system has asked the court to dismiss the case.

"We're not coding things that weren't coded before," Chrencik said. "It looked like we started coding nutritional deficits. It looked like we had this huge uptick, but in reality they had always been there."

The decision of who is right will ultimately be made in U.S. District Court, but the case brings up an issue that has for years contributed to billions of dollars a year in health care fraud. The Department of Justice recovered $5.6 billion in fraudulent payouts last year, and more than $2.9 billion was health care-related.

The state Health Services Cost Review Commission, which sets hospital rates in Maryland, also made the severity of an illness more important when it changed its rules in 2005, tying higher reimbursement to more severe secondary diseases.

Upcoding made headlines in the 1990s, when many hospitals were accused of profiting from the practice. The most visible case was that of Columbia/HCA, a national chain sued by the federal government for Medicare fraud that included upcoding. The hospital chain, which eventually changed its name to HCA-The Healthcare Co., settled in 2000 for $840 million, which was the largest settlement in history at the time.

It is unclear how much upcoding contributes to Medicare fraud today, because it is not tracked separately, but government officials said it is still an issue.

Thomas V. Russell, the inspector general for the Maryland Department of Health and Mental Hygiene, said the state does routine data monitoring of Medicare payment records to identify "outliers or billing patterns that are out of sorts." Federal "Medicare Strike Force" teams also monitor Medicare data in several cities and brought to light $1 billion in fraud cases last year.

The state also gets tips from hot lines and former employees who have been encouraged by new laws that reward whistle-blowers. The False Claims Act allows anyone with knowledge of a false Medicaid or Medicare claim to file a lawsuit and share a percentage of damages. Maryland passed its version of the legislation last year.

"We are being given more tools by the federal government to pursue this," Russell said. "Every day there are more software updates that come out that will perform data analysis to kick out outliers that may identify problems with upcoding and billing issues."

The case against Clinton-based Greater Metropolitan Orthopaedics Institute was settled last year for $2.5 million under the False Claims Act. The settlement resolved allegations that over a four-year period beginning in 2001 doctors billed for patients they never saw or services that weren't in patient medical records. The institute also entered into a Corporate Integrity Agreement with the Department of Health and Human Services, according to federal prosecutors.

In Connecticut, Masonicare Health Center agreed last year to pay $447,776 to settle allegations over the way it billed for the use of the drug Lupron to treat prostate cancer. The government alleged that the health center billed for a higher dosage of Lupron — one that is normally used to treat fibroids and endometriosis in women, and that has a higher reimbursement. The company did not admit wrongdoing in the settlement.

California-based Prime Healthcare Services, meanwhile, is being investigated by state and federal authorities for possible upcoding by diagnosing elderly patients for septicemia blood infections to get higher Medicare reimbursements, according to news reports. The company denies the allegations.

Russell said that he doesn't think upcoding has gotten any better or worse in recent years. He thinks many instances of overbilling the Medicaid system are mistakes rather than actual fraud.

In the Kernan case, the government claims the number of patients who had kwashiorkor as a secondary disease increased a hundredfold — from three in 2005 to 358 in 2008 — making up more than a third of all Maryland cases, according to statistics from the state Health Services Cost Review Commission.

Kwashiorkor is a disease rarely seen in America, which is what brought attention to it at Kernan. It is typically found in impoverished places like Africa, and is most common in children, who develop ulcers and swollen bellies and feet.

In court documents arguing against UMMS attempts to dismiss the case, federal officials said Kernan systematically upcoded and that the patients were not malnourished. One patient, they said, was 5 feet 2 inches tall and weighed between 170 and 200 pounds.

The documents said that after Maryland's cost review commission implemented new rules to make secondary diagnoses more financially rewarding, Kernan trained its staff about malnutrition as an important and common secondary diagnosis. The government said physicians were sensitized to Kernan's goal to increase compensation by using the diagnosis. The hospital also did no auditing or monitoring of the secondary diagnosis even as it increased significantly, court documents say.

While not claiming their patients had kwashiorkor, UMMS officials said some patients do have severe nutrition deficiencies that share the same coding. Such patients may have been in car accidents and then been treated in the hospital for a long period of time, attached to a feeding tube.

The officials say there was no intent to defraud the system and that is why they are fighting the claims.

"If you wanted to make it appear as though there was over-coding, we said we'll dispute that," Chrencik said. "We're not going to roll over."

The Justice Department would not discuss the case because it is still pending.

Some say the government shouldn't be so quick to allege fraud.

A trade group that represents medical colleges, including the University of Maryland, said that coding can be a complicated process. Ivy Baer, director and regulatory counsel for the Association of American Medical Colleges, said hospitals aren't trying to deceive the system. They frequently audit their systems and are on constant lookout for mistakes, she said.

Faulty data input can be attributed to human error or poorly trained staff, Baer said.

"When the government does an audit, a lot of times they are running data and just looking at what is being coded," Baer said. "Even if they see an unusual pattern and it raises a red flag that doesn't mean there is fraud. When you look at it, it may appear as if there is fraud until you gather all the facts."