UW to pay $35 million in overbilling case

SEATTLE — The University of Washington agreed to pay $35 million Friday to settle claims it systematically overbilled Medicaid and Medicare and that it destroyed documents to hide the practice.

The federal government will get more than $25 million under the settlement and Washington state $2 million, while Mark Erickson, the whistle-blower who brought the fraud to light, will receive $7.25 million.

"I feel vindicated," said Erickson, 35, who is between jobs and doesn’t know what he’s going to do with the money. "It’s been a battle for five years."

U.S. Attorney John McKay refused to say how much the overbilling totaled. But he told a news conference that had the case gone to trial, the government would have sought a substantially higher figure.

McKay said the settlement was in the best interest of all involved.

"We wanted to make sure we didn’t damage the core medical system in this region … but we had to be sure we held (UW Medicine) accountable," he said.

The university said the medical school will pay the $35 million in June out of its $180 million in reserves. The settlement will not require an increase in tuition or patient fees, said Dr. Paul Ramsey, vice president for medical affairs and dean of the medical school.

In addition, the case cost the UW $27 million in legal fees, only $3.5 million of which is potentially covered by insurance.

"There’s no question that billing errors were made," Ramsey said. "While most of these errors were the result of innocent mistakes, we recognized our responsibility and took immediate steps to improve our compliance efforts."

Ramsey said the university has added staff, provided more training to improve its billing practices and now spends nearly $4 million a year on compliance. As part of the settlement, the university’s medical billing practices will be subject to a "corporate integrity agreement" — including independent audits — for the next five years.

The fraud settlement — the largest against a teaching hospital since the University of Pennsylvania agreed to pay $30 million in 1995 — ends a five-year investigation that won guilty pleas from two prominent doctors. The $35 million total includes $600,000 in retsitution paid by the UW on behalf of those two doctors.

The lawsuit, which has been under seal for almost five years, details how the university changed its policies to allow doctors to bill the government for more expensive services than they had performed.

UW Physicians, a group of doctors, started a compliance program in 1996 to check whether departments were following the government’s billing policies and legal requirements. The program auditors found rampant errors. Doctors routinely overbilled Medicare and Medicaid, charging for more expensive services than they had performed, the lawsuit said.

When UW Physicians found out, according to the lawsuit, it hid the practice by changing the compliance policy, making it acceptable to charge for a treatment that was more expensive than the treatment they actually provided.

The physicians group destroyed the old reports and wrote new, sanitized versions, the lawsuit said.

Erickson was a compliance officer for UW Physicians and Children’s University Medical Group, which handle billings for doctors at UW centers and clinics, when he filed his lawsuit in 1999.

He said Friday that he first began raising questions about the university’s medical billing practices in 1993 after he was ordered to help submit backdated and fabricated medical notes with dialysis bills.

In 1999, after he had been promoted to internal auditor, he decided to go to the feds. The breaking point, he said, was being ordered to destroy audits that revealed the fraudulent billing and replace them with sanitized versions.

He helped investigators by wearing a wire and by making copies of documents that were shredded, he said.

University officials denied Friday that any documents were deliberately destroyed and insisted that the vast majority of the mistakes were accidental, the result of a complicated health care system.

Erickson questioned that, noting that the university went to great lengths to prevent the case from going to trial. In addition to the $35 million settlement, the $27 million in attorney fees and $600,000 in restitution on behalf of the two doctors, the university agreed to pay one of the doctors, H. Richard Winn, a severance of up to $3.7 million in exchange for his guilty plea to a charge of obstructing the investigation.

Winn was forced to resign as chairman of the UW’s neurosurgery department and is now on the faculty at Mount Sinai School of Medicine in New York.

Dr. William Couser, a kidney specialist and former president of the American Society of Nephrology, pleaded guilty to submitting inflated bills to a private provider, Medicare, Medicaid and a Defense Department health plan.