Medical Groups, UC Sue Federal Officials Over Audits

In the first legal challenge to widespread audits of teaching hospitals and physicians, the Assn. of American Medical Colleges and the American Medical Assn. have sued federal inspectors, charging that the reviews are being conducted unfairly.

The audits could have enormous cost implications for the University of California system, which was accused in a whistle-blower lawsuit last year of overbilling the government by “millions of dollars.” The UC system, as well as the California Medical and California Healthcare associations, are among 21 plaintiffs nationwide to join the suit.

At issue are nationwide audits over the last year of billings by teaching hospitals and physicians for procedures performed between 1990 and 1995. The plaintiffs allege that the billing rules at the time were inconsistent and vague, particularly about whether a faculty physician’s presence was required to bill for his or her services.

But according to the suit, auditors are penalizing hospitals for overbilling based on new 1996 standards and are unjustifiably assuming that billing errors were fraudulent.

Officials at the U.S. Health Care Financing Administration, which oversees the Medicare program, declined to comment on the lawsuit.

The audits are being conducted under a federal initiative called the Physicians at Teaching Hospitals program, prompted in part by a Medicare fraud investigation at the University of Pennsylvania that resulted in a $30-million settlement for the federal government.

A UC spokesman said the university is cooperating with federal regulators despite its participation in the lawsuit. No audit has begun at UC medical centers, but federal inspectors have requested preliminary information from each of the five medical schools.

Though the scope of the audit has not been determined, “I would anticipate audits will begin on one medical center in Southern California and one in Northern California,” UC Deputy General Counsel John Lundberg said Thursday.

Southern California medical center campuses include UCLA, UC Irvine and UC San Diego; Northern California’s include UC San Francisco and UC Davis.

UC hospitals--and others targeted across the country--are especially concerned about challenges to billing for procedures performed by medical residents. By their reckoning, the law was unclear before 1996 on whether a supervising physician needed to be present for the key portions of a procedure to bill for his or her services. Since then, the physician’s presence has been required.

The issue is important financially because residents’ salaries are relatively low and fixed. Adding faculty physicians can boost the bill considerably.

UC was targeted by a separate civil action last year, when two unnamed whistle-blowers alleged a massive overbilling scam involving government programs, including Medicare. That suit involved all five UC medical centers but focused primarily on UC Irvine.