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From Health Law Daily, February 19, 2015

Upcoding charges land hospitalists on the hook for FCA liability

By Melissa Skinner, J.D.

Claims against hospitalists accused of using codes to bill Medicare for higher and more expensive levels of medical services than were actually provided could proceed because the government included the appropriate level of specificity in its claims. Moreover, claims that the hospitalists violated the federal False Claims Act (FCA) were allowed to stand because there was a causal connection between the hospitalist’s actions and the government’s injury. The court, however, granted the hospitalist’s motion to dismiss to the extent that the government did not sufficiently state a claim against the hospitalist’s subsidiaries and affiliates (U.S. ex rel. Oughatiyan v. IPC The Hospitalist Company, Inc., February 17, 2015, Lefkow, J.).

Background. Bijan Oughatiyan, who worked for IPC The Hospitalist Company, Inc. (IPC) as a physician, brought suit against IPC claiming that some of its billing practices violated the FCA. The government intervened in the suit and filed a complaint against IPC and its subsidiaries and affiliates alleging FCA violations as well as liability under the theories of payment by mistake and unjust enrichment. According to the court, IPC “operates a nationwide physician group practice focused on the delivery of ‘hospital medicine and related facility-based services.’”

‘Upcoding’ claims. Specifically, the government alleged that IPC engaged in “upcoding” or, as the court described it, the practice of using codes in the Medicare Physician Fee Schedule to bill Medicare for “higher and more expensive levels of medical service than were actually provided.” Further, the government claimed that IPC used certain programs within the company to encourage the practice of upcoding among its physician employees. Included in these practices was the creation of a “dashboard” report, which was circulated to IPC officers, executives, and sales and marketing staff every month and which was meant to monitor billing practices and guard against excessive billing. However, according to the government’s claims, “rather than keep track of hospitalists who billed to higher codes too frequently, IPC chose to monitor hospitalists who did not bill to those codes frequently enough.”

The government pleaded these claims by outlining five specific and allegedly false claims submitted to Medicare. This description included what the court called “evidence of what the government claims are the effects of upcoding: hospitalists who have billed for so many complex procedures that the work they claimed to have completed in a day would take far more than [24] hours.” As an example, the court highlighted the claim that one hospitalist billed for services in one day that would take, on average and in total, over 43 hours to perform.

Standing. IPC first attacked the government’s complaint by claiming that it lacked standing to bring the suit. Specifically, IPC claimed that the government “does not even allege a causal connection or relationship with [IPC] and therefore lacks standing.” The court noted that the government was not required to draw any connections regarding the relationship between IPC and the government but, instead, must simply allege an injury to the government that is traceable to IPC’s actions. As such, the court found that the government had alleged such a link and, therefore, that the government had standing to bring the suit.

Motion to dismiss. The rest of IPC’s motion to dismiss the government’s complaint hinged on the argument that the government had not properly pleaded the claims of fraud with enough particularity to withstand dismissal. While IPC argued that the particularity standard for pleading fraud charges requires the government to allege the “who, where, and how” of the fraud, the court noted that such information are examples of the detail necessary to plead fraud but are not “essential elements.” In turn, the court found that the government met the heightened standard of pleading fraud with particularity in terms of the alleged actions of IPC. However, the court found that the government failed to explain the role of IPC’s subsidiaries and affiliates in the alleged fraud with the appropriate level of specificity and, thus, dismissed those parties from the matter.

The case is No. 09 C 5418.

Attorneys: David R. Lidow, U.S. Attorney's Office, for United States of America. Holly C. Barker (Morgan Lewis & Bockius LLP) for IPC The Hospitalist Company, Inc.

Companies: United States of America; IPC The Hospitalist Company, Inc.

MainStory: TopStory FCANews BillingNews CMSNews FraudNews PaymentNews QuiTamNews IllinoisNews

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