New Settlement Highlights Old Fraud:  Upcoding.

Medicare, like many other insurers, often pays doctors a standardized rate based on the service they performed. Open heart surgery costs $X, a blood test for cholesterol costs $Y, and a physical costs $Z.

Upcoding is a fraud that centers on healthcare providers submitting improper medical codes to insurers for reimbursement, generally for improperly high reimbursement. Doing so can trigger liability under the False Claims Act, a law that empowers whistleblowers to detect, prevent, and deter fraud against the government.

To make the payment system practical, medical billing is generally done through a standard series of codes, with thousands of different healthcare services being assigned a code, often known as CPT (short for common procedure terminology) codes.

Abusing this system by submitting codes for services that are more expensive than those performed, or for services never performed, is known as upcoding. That’s exactly what a recent whistleblower case alleged the University of Colorado Health did. The case ended with UCHealth agreeing to pay $23 million to resolve the allegations.

The allegations centered around a set of codes called evaluation and management (E&M) codes. E&M codes are used for evaluating a patient. In emergency medicine, which this case concerned, there are five E&M codes.  Choosing which one to bill is based on a variety of factors, including how long a visit took and how many bodily systems were evaluated during a visit. Longer, more complicated visits draw higher reimbursements than shorter, simpler visits.

Here, the UCHealth Emergency Department was accused of automatically, due to the system’s health software, billing the most expensive E&M code (CPT® code 99285) each time patient vital signs were checked, no matter how long or complex the visit was, allegedly resulting in Medicare overpaying the system by millions of dollars. The allegations included that UCHealth knew about this problem and refused to fix it. 

The case was brought forward by whistleblower Tim Sanders, who was employed by the University of Colorado Health for two months in 2020. As a Certified Coding Specialist, Sanders’ position involved resolving billing complaints from disgruntled patients. Through this role, he learned that UCHealth was routinely overcharging for ER visits because of its automated coding rule that applied CPT code 99285 based on “frequent monitoring of vital signs.”  Sanders will receive an award of $3.91 million for bringing the case forward.

Because the alleged fraud was so systematized, this is one of the largest upcoding settlements in recent memory, although it is not the largest.  In 2017 a hospitalist group called TeamHealth Holdings paid $60 million for upcoding. 

Due to the complicated and often opaque nature of medical billing, insiders like whistleblower Tim Sanders are vital to the Government’s efforts to prevent, detect and root out coding fraud.

Like most False Claims Act settlements, this case includes an important teaching moment for other hospital systems seeking to be compliant.  When using automated coding tools like the software logic for coding, it is important to ensure that those meet the coding standards that the providers have adopted. With the advent of and rise in AI-assisted coding, this lesson is really one to live by. 

As an interesting coda to this story, the US Department of Health and Human Services (HHS) Office of Inspector General OIG) issued its own press release for this settlement noting that as part of the Department of Justice (DOJ) settlement here, UCHealth refused to agree to a Corporate Integrity Agreement (CIA), prompting the OIG to reserve the right to exclude UCHealth for the conduct in the Settlement Agreement. 

The press release ends with this ominous statement: “Because UCHealth refused appropriate integrity obligations, OIG may use various tools to monitor UCHealth’s compliance with the federal health care programs.”