Hospitalist Firm Accused Of Upcoding

A rapidly growing Los Angeles hospitalist firm has been accused by the U.S. Justice Department of systematically overbilling the Medicare and Medicaid programs by millions of dollars and training its staff to do so.

IPC The Hospitalist Co. was named in a whistleblower lawsuit unsealed in Chicago earlier this week, accusing it of violating the federal False Claims Act and a variety of state civil statutes. 

The company, which is based in North Hollywood, provides hospitalist services in 18 states. IPC subsidiaries in 13 states – which mostly operate under the names InPatient Consultants or Hospitalists – were also named as defendants.

“The overwhelming evidence of IPC hospitalist upcoding in conjunction with IPC's ability to, and strong financial interest in, monitoring its hospitalists plainly demonstrates that IPC knew about, did not stop, and in fact encouraged its hospitalists to upcode,” the suit said.

About half of IPC's revenue is derived from Medicare and Medicaid billings, according to the U.S. Attorney's office.

The suit had originally been filed by a former hospitalist for the firm, Bijan Oughatiyan, M.D. 

Oughatiyan, who practices in Texas, worked for IPC in San Antonio between 2003 and 2008. He claimed IPC trained him to upcode as a matter of course. 

In 2005, Trailblazer, then the Medicare administrative contractor (MAC) for the state of Texas, contacted Oughatiyan, claiming his use of billing codes was at variance from the typical hospitalist. He underwent Medicare coding training at Trailblazer's request in order to reduce his outlier billing pattern.

Oughatiyan claimed that after the training he was continued to be pressured by IPC executives to bill more and that he should disregard Trailblazer's warnings. 

In 2006, Trailblazer apparently contacted a large number of IPC's hospitalists in Texas, expressing concern about potential overbilling. Company officials allegedly told the staff to ignore the letters, according to the suit.

Oughatiyan eventually left the company, having refused to upcode after his training sessions and convinced he would be fired if he didn't generate more revenue. 

The federal government recently joined Oughatiyan's suit, prompting its unsealing.

The suit alleges that IPC took advantage of the broad diffferences in how the Medicare program pays for specific medical services. 

For a hospitalist evaluating and managing a patient, it may pay between $87.61 and $175.88 a day, depending on the intensity and length of services and how it is coded. And IPC took every opportunity to bill using the more expensive codes, according to the suit.

Among the allegations:

• IPC physicians almost always billed the Medicare program for services at the highest level of billing codes. In a sampling of 73 different billing records submitted by 29 different physicians working for IPC, they billed at the highest level 94% of the time. Not a single bill was submitted at the lowest-priced code.

• IPC physicians regularly billed multiple times daily for procedures so time consuming they could not be performed by an individual in a 24-hour day, “even using extremely conservative estimates,” according to the lawsuit. In one instance, an IPC hospitalist billed for patient encounters in a single day that should have taken at least 43 hours to complete – at two separate facilities at least 30 minutes distance from one another. Another hospitalist billed for a single workday of tasks that should have taken at least 36 hours to complete. And yet another billed in a single day tasks that should have taken at least 32 hours to complete.

• IPC trained its hospitalists – many of whom have recently finished their medical residencies – to upcode and bill at the highest levels whenever possible, telling them that the care they provide is very complex and should be billed accordingly.

• Hospitalists who billed less than their peers were pressured by IPC management to “catch up.”

• IPC paid physicians bonuses based on how much they billed that often exceeded their annual salaries.

• The alleged systematic overbilling overextended IPC's hospitalists to the point where patient care may have suffered. In one instance, a single hospitalist had as many as 65 patient encounters in a one day, according to the suit.

“IPC is a rapidly growing corporation which, if unchecked, will continue to submit false claims for reimbursement for upcoded services, causing the already-strained Medicare and Medicaid systems to overpay millions of dollars to IPC, and continue to adversely impact patient care,” the suit said.

The firm was founded in 1995 and now employs about 650 hospitals – including physicians, nurse practitioners and physician assistants – companywide. For the first nine months of 2013 it reported net income of $31.9 million on revenue of $447.9 million. That's up considerably from the $24.1 million of net income on revenue of $385.9 million reported for the first nine months of 2012. The company has acquired about two-dozen different medical groups in various parts of the country over the past several years.

Qui tam, or whistleblower suits, are often filed by employees or contractors of companies where they suspect fraud or other forms of wrongdoing. The U.S. Justice Department will join such suits and share them with the public if they believe they have merit and federal dollars are at stake. In many instances, a joined suit will prompt the defendant to settle rather than go to trial.

The U.S. Attorney is seeking treble damages as well as between $5,500 and $11,000 for each False Claims Act violation.  Oughatiyan is entitled to 15% of any judgment.

A spokesperson for IPC declined to comment, citing the pending litigation. In a filing earlier this week with the Securities and Exchange Commission, the company said the U.S. Attorney's Office in Illinois had asked for billing records between 2003 and 2010. It also noted that “several state attorneys general are examining our Medicaid claims in coordination with the (Justice Department).

“We continue to be vigilant in our enforcement efforts to ensure that healthcare programs funded by the taxpayers pay only for appropriate costs,” said U.S. Assistant Attorney General Stuart F. Delery.

News of the lawsuit has had little effect on IPC's stock, which traded around $61 a share earlier this week on Nasdaq.

Oughatiyan, who currently practices with a hospitalist firm in the Dallas area, did not return a phone call seeking comment.

A trial date for the lawsuit has not yet been set.