Choose the ‘PATH’ carefully when facing fraud squad

Academic practices weigh record disclosure options

By Christopher A. Myers, JD

Former Assistant U.S. Attorney for the District of Columbia

Holland & Knight

Washington, DC

Robert Frost chose the road less taken, but for academic physicians, the path is not always easy to determine — particularly in the tangled thicket of Medicare fraud.

By now you’re all too familiar with recent Medicare fraud settlements in teaching hospitals:

• The Clinical Practices of the University of Pennsylvania (CPUP) paid a $30 million settlement following auditors’ charges of improper billing for resident services. CPUP is the approved physician faculty practice plan of the clinical departments of the School of Medicine of the University of Pennsylvania (see related stories in Physician’s Payment Update, May 1996, pp. 76-78.)

• Thomas Jefferson University Hospital and its physician faculty practice paid a $12 million settlement following allegations of teaching physicians’ billing violations (see PPU, October 1996, pp. 149-156).

In March 1996, the Office of the Inspector General (OIG) and the Department of Justice announced an expansion of compliance audits of teaching hospitals. Investigations into potential violations of the attending physician billing regulations were begun at the University of Florida Medical School and at six teaching hospitals in Pennsylvania.

Because of the large settlement with CPUP and the preliminary results of the other announced investigations, OIG also has announced a nationwide expansion of "reviews of compliance with rules governing physicians at teaching hospitals." The audit initiative, known as "PATH" (Physicians at Teaching Hospitals), will have two components. Before you chose which path to take, consider carefully the pros and cons of each, which are outlined below:

PATH I. This will be a series of OIG-conducted audits at teaching hospitals such as the one performed at CPUP and the ones being done in the other announced investigations in Florida and Pennsylvania. These audits will be expanded nationwide. In fact, Assistant Inspector General Lewis Morris has announced that all 125 academic medical institutions in the country will be audited, if necessary, before the project is over.

If it’s not documented, it didn’t happen

The focus of these audits/investigations will be compliance with Intermediary Letter 372 (an interpretive letter intended to explain the requirements of the attending physician regulations) and "the appropriateness of service codes." Based on the CPUP investigation, it is OIG’s view that in addition to improper physician billing for services provided by residents outside the presence of teaching physicians, many services were substantially upcoded, particularly evaluation and management services.

The chief concern of OIG in these investigations is not necessarily what level of service was provided, but what level of service was documented. OIG takes the view that if a service is not properly documented, it did not take place.

PATH II. This program, which OIG would like all teaching hospitals not currently under investigation to enter, is a modified version of other OIG voluntary disclosure programs. Under the PATH II program, teaching hospi - tals would voluntarily submit to compliance audits to be conducted by qualified independent auditors and share the results of those audits with OIG and local U.S. Attorney’s offices.

OIG would have final approval of the audit protocol. Attorney-client privilege and all confidentiality of the audit results would be required to be waived in advance; all draft reports would have to be shared with OIG; and OIG would be entitled to be present during all meetings with auditors to discuss the audit results. The audit would be fully paid for by the hospital.

The audit period covered by PATH II would be 1990 through 1995. The audit protocols would require review of both inpatient and outpatient billings. An approach similar to that taken at CPUP is likely, in which 100 inpatient services and 100 outpatient services will be examined and the results extrapolated for the full six-year period.

OIG officials have stated that the benefits of participation in the PATH II program are the following:

• OIG will take into account the level of cooperation of the hospital in deciding whether or not to seek exclusion from participation in federal health care programs.

• OIG will bring to the attention of the Department of Justice the level of cooperation, which may influence the decision whether or not to bring criminal or civil False Claims Act suites.

• Participation will streamline the process of resolution of disputes, give the institution a role in the design of the audit program and the choice of auditors, and give the institution some control of public relations issues.

Don’t overlook disadvantages

Among the downsides to participation in the program are:

• There is no certainty of what the settlement policies of either OIG or the Department of Justice will be.

• Institutions are required in advance to waive the attorney-client privilege.

• There is no guarantee that problems uncovered during the audit will be resolved civilly.

• Even with civil resolution, there is no advance promise to limit damages claims to one, two, or even three times actual overbillings. The CPUP settlement was for three times the alleged overbillings; the Thomas Jefferson settlement was for two times the alleged overbillings.

• There is no agreement to limit the investigation to Intermediary Letter 372 issues, and OIG announced that it feels it is the auditor’s duty to disclose any other problems found during the audit.

• There is no limitation on civil or criminal exposure of individuals (doctors, department chairs, medical school instructors, etc.) associated with the institution.

• There is no time limit or expense limit on the investigation.

In a question-and-answer portion of a recent presentation, Assistant IG Morris was asked whether other government programs besides Medicare were going to participate in this initiative. His answer was somewhat cryptic. He said the Inspectors General of the other federal health care programs were being advised of the initiative and some of them may follow up later. He further stated that this has been primarily a Medicare initiative and that he was unaware of any Medicaid programs that had expressed an interest so far.

Another important issue related to this initiative is what standard of review will be used by either OIG or an independent auditor in conducting a PATH audit. OIG acknowledged that teaching physician billing is complicated area, and that different Medicare carriers have given different guidance to the hospitals whose bills they reviewed and paid. Part of the PATH II process will be a negotiation between the teaching institution and OIG on what standard will be used.

OIG seeks carrier, hospital standards

OIG currently is trying to gather all of the guidance issued over the years by the different carriers. OIG announced that it will hold institutions to the standards of their own carriers. At the same time, however, OIG will want to review any internal hospital policies to determine the level of the hospital’s understanding of the regulation. If the hospital’s own policy showed that it understood the physical-presence requirements of Interme diary Letter 372 and chose not to follow them, OIG will hold the hospital to its own policy.

In light of this new initiative, it is in the interest of all teaching hospital officials to make a careful assessment of whether or not to participate in the PATH II program. It is questionable whether OIG has the resources to actually carry out its stated intention to audit all 125 academic medical institutions in the country, but the CPUP experience certainly gives them an incentive to try.

Like the 72-hour DRG initiative, in which OIG has threatened several thousand hospitals with False Claims Act prosecutions, OIG may be counting on the fear of exclusion from federal health care programs and the massive penalties available under the False Claims Act to coerce teaching hospitals into doing OIG’s work and to save scarce enforcement resources. There also are serious questions raised by OIG’s efforts to coerce a waiver of the attorney-client privilege.

There are no easy answers to the issues raised by this new OIG initiative. Whether or not to participate in the PATH initiative is a decision that should be made by senior management and/or the board of directors after careful consideration. Many teaching hospital and associated physician clinic officials have taken a wait-and-see attitude toward the new Teaching Physician billing rule, which went into effect on July 1, 1996, and have not taken any steps at all to ensure compliance with either the old or new regulations.

In light of the PATH initiative, teaching physicians and hospitals cannot afford to simply sit back and hope they are not noticed. The dollars that were paid to settle the CPUP investigation have prosecutors salivating. If teaching hospitals do not at least attempt to put into place a program for compliance with the new regulation, they are likely to be treated much more harshly in the event of an audit, which OIG unequivocally says is coming.