Hunter-killer software used to target hospitals

Using special software to detect upcoding, a whistleblower has nailed a Chicago hospital for a $3.4 million settlement.

Compared to other whistleblower cases that cost hundreds of millions, the money here isn't noteworthy yet. What's ominous is that this whistleblower didn't work at the hospital he sued.

Instead, he was able to take public information on hospital billings, sift it through a computer, and file a false claims case that attracted the support of the Justice Department. The whistle blower has also sued an undisclosed number of other hospitals, which could mean that the total dollar amount becomes substantial.

"It's genius," says a source familiar with the hospital side of the case. "It's revolutionary. It's like a pirate ship, or those people who searched for the Titanic."

The suit was filed against Louis A. Weiss Memorial Hospital in 1996 by Richard Newbold, who is described in the suit as the CEO of Health Outcomes Technologies, a Doylestown, PA, firm that developed software for measuring health outcomes and disease management. Newbold developed a computer program called Disease Software, which was designed "to determine how efficiently a hospital is treating patients with a certain disease," according to the suit. "As part of a research project into bacterial pneumonia," Newbold found that some hospitals coded 40% to 90% of bacterial pneumonia claims as pneumonia caused by unidentified bacteria (DRG 79/482.89), which garners a higher DRG payment rate than cases where the bacteria is identified, such as DRG 89.

The figure for Weiss in 1994 was almost 80%, while the the national average in 1993-94 was closer to 4%, the suit claimed. Newbold derived his data from analyzing more than a million pneumonia discharges from more than 5,000 hospitals in the MEDPARS database.

Neither Newbold nor his attorney returned phone calls. But a copy of Newbold's suit, which was filed in Philadelphia, contains 13 blank pages listing all of the hospitals that Newbold has sued, but whose names have not yet been released by the courts.

So far, two hospitals in Springfield and Easton, PA, have settled for $600,000 and $1.2 million, respectively. For all the defendants, DRG 79/ 482.89 claims accounted for 34.7% of all of their pneumonia cases, resulting in $37 million in Medicare overpayments.

In a written statement, Weiss said the billings targeted by the suit were based on advice received from a "physician/consultant who was thought to be an expert in examining medical charts." The hospital denies any wrongdoing and says it has terminated its relationship with the physician.

As part of its corporate integrity agreement with OIG, Weiss also must conduct a self-audit of all of the coding work done by the consultant, and do a pre-billing review of all inpatient Medicare 482.89 claims.

Ironically, the Disease Auditor software that Newbold used was originally intended to help providers themselves spot upcoding, says Chip Richter, a project manager for Health Process Management Inc., the successor company to Health Outcomes Technologies. It also can be used by payers such as insurance companies, though Richter would not comment on whether agencies such as OIG were interested in the software.

Newbold did not design the software, according to Richter, and he is no longer with the company, though he is still listed on Health Process Management's Web site as the firm's founder and chief scientist.

Could the software be used by any freelance whistleblower to stalk any hospital? "If someone else had the wherewithal, they could do it," says Dan May, the assistant U.S. Attorney in Chicago who handled the Weiss case. "The records are public."

It would be simple for someone to collect public information on hospital claims data and compare them to national norms, says a source familiar with the Weiss case. "You can do this with any DRG," he adds.

But Richter maintains that a whistleblower would need a powerful personal computer — with more than six gigabytes of memory — and access to immense quantities of statistical data that often come on old-fashioned tape reels.

May says he has prosecuted other whistleblower cases, but this is the first time in his experience where the whistleblower was an outsider who never worked at the company he sued. "Most of the time, they are former employees," he adds.

Yet Susan Dein Bricklin, the assistant U.S. Attorney in Philadelphia who handled Newbold's suit against Springfield hospital, says whistleblowers don't need to work for an institution to sue it. She cites a case where the whistleblower was actually a competitor of the firm that was sued.