Medicare pays hospitals for treating patients based on the severity of each patient's illness. Experts say this creates temptation for hospitals to overstate patient ailments to earn more money.
Prime Healthcare Services reports rates of lucrative medical conditions that are many times higher than at other California hospitals. Asked about conditions such as septicemia and major malnutrition, the firm has said it relies on early interventions and treatments. However, former medical coders, managers and the Kaiser Foundation Health Plan have spoken out about Prime's medical documentation and coding, some describing it as illegal.
The following documents reflect the sentiments of former employees; Kaiser; and Prime's founder and board chairman, Dr. Prem Reddy. A Prime spokesman has said the company follows all laws and regulations and cautions against listening to disgruntled employees.
Dec. 30, 2010, resignation letter of Joseph Ingrande, former manager of revenue cycle and coding, Alvarado Hospital. Ingrande attended the Dec. 21, 2010, meeting detailed in this report and said it spurred him to leave:
After personally being a part of Prime Health Care activities, I have the actions and procedures taken that I believe to be inappropriate. Medicare guidelines are clear and specific when it comes to fraud and abuse.
To stay and be a part of these practices would give the appearance I approve and validate these procedures. I cannot with good (conscience) be a part of these activities which could potentially put me in legal jeopardy with (Medicare).
Therefore, I resign my position effective immediately. I wish to thank the former leadership of Alvarado Hospital for giving me the opportunity to be part of this once great organization.
We have encountered many challenges here at Desert Valley Hospital in regards to coding and reimbursement issues. The challenges that we face here are uncommon to most organizations, and you have dealt with them well. As Administration reviews your (Medicare) charts and makes recommendations to you to change the coding, continue to do the 'right thing'. Never forget that you are the experts when it comes to coding.
During my time here, I have had an opportunity to filter many of the communications from Administration to coding. I am concerned with the method of the review process after I leave.
As you receive communications from Administration regarding coding (specifically the sequencing of diagnoses), stay committed to your ethics and your knowledge of what is right. I have worked with you all long enough to know that you will not be swayed into adding or diagnoses simply because it increases reimbursement. Your dedication to ethical coding is encouraging.
August/September 2005, testimony of Sandy Barber, former coding supervisor, Desert Valley Hospital, San Bernardino County Superior Court. Barber testified on behalf of hospital nurse managers in an employment case. Reddy sued the nurses, and they countersued:
Q: What is up-coding?
A: Up-coding is assigning a code that will bring in greater reimbursement for a hospital or facility.
Q: Do you know whether or not up-coding is legal or illegal?
A: It is illegal.
Q: Did Doctor Reddy ever order you and your coders to engage in up-coding?
A: Yes, he did.
Q: On how many occasions?
A: Two or three occasions.
Q: Can you recall any examples of things Doctor Reddy ordered you and your staff to up-code.
A: One example would be a patient who has an exacerbation of COPD, which, in itself, has its own diagnostic code. We were told that this was the same as acute respiratory failure. Acute respiratory failure does not have the same code and is not coded in the same manner.
Q: Let me stop you because I think we're all a little confused about COPD. What is that?
A: Chronic obstructive pulmonary disease.
Q: It's a lung issue?
Q: Doctor Reddy was telling you that chronic obstructive pulmonary disease is the same as –
A: An exacerbation of COPD is the same as acute respiratory failure.
Q: And you're telling us that that is not true?
A: That is untrue.
Q: Which one of those is the more serious diagnostic code or condition?
A: Acute respiratory failure.
Q: Does acute respiratory failure – does that code produce a greater income stream than COPD?
A: For Medicare, it is a higher DRG, which is how reimbursement is paid by Medicare …
Q: Are you saying Doctor Reddy said if you have an exacerbation of chronic obstructive pulmonary disease he wanted it coded at a higher level of care as acute respiratory failure?
Q: Can you think of any other examples where doctor Reddy wanted up-coding to be done?
A: He also instructed us to let the physicians know the code difference in the acute respiratory failure and the exacerbation of COPD because they're not coders and they do not know which code pays more, and, therefore, the documentation would not exist. If they knew the difference, they could document it as such.
Q: He wanted you (to) make sure the doctors knew which one paid more?
A: Yes, he did.
Q: In these meetings that you and your coding staff had with Doctor Reddy, can you describe for us how Doctor Reddy conducted himself at these meetings.
A: My experience in each of those meetings is I felt more like I was being ambushed than I was having a meeting with somebody. Often times the meetings were called for one reason and that was not what was discussed in the meetings.
He was angry, irate, yelling, slamming fists. Actually, I was very scared and quite upset even after the first meeting.
Q: Did he ever talk to you about how he wanted you to think about issues (at) work?
Q: What did he say on that subject?
A: He talked about that Desert Valley Hospital is his hospital. He was the owner of Desert Valley Hospital. He was Desert Valley Hospital. Desert Valley Hospital paid my salary, and he didn't like bureaucracy, and this is a free country, and if I did not like his reasoning, I was welcome to go elsewhere.
August/September 2005, testimony of Dr. Prem Reddy, owner, Prime Healthcare and Desert Valley Hospital, San Bernardino County Superior Court:
Q: Have you educated yourself on the different definitions for the diagnosis groups?
A: Yes, ma'am. I can't say I'm a certified coder, but maybe I'm better than that because I'm a doctor. I try to understand what a doctor might have missed or might have misunderstood. Therefore, I look at it critically and analyze.
Q: Between 2001 and 2003, did Miss Buchanan or Miss Crouch ever tell you that they believed you were improperly up-coding Medicare charges?
A: No, ma'am.
Q: Did anybody in that time period raise that issue with you?
A: No, ma'am.
Q: When you have asked your coders to speak to the doctor for the possibility of up-coding, have you always done it in good faith?
A: Yes, ma'am, absolutely. That's one way to come out of the red and be able to keep things going.
Q: Have you ever falsified a chart so a coder could see what they needed to see to up-code?
A: Ma'am, that's very illegal, and you will lose your ability to practice medicine. I love to practice so much that I would never ever risk myself to do such a thing. If I did that, ma'am, I would be behind bars not sitting here and still practicing.
June 21, 2010, counter lawsuit, Kaiser Foundation Health plan, filed in Los Angeles County Superior Court:
Prime physicians and staff are instructed to engage in a fraudulent billing practice for Medicare patients known as "upcoding," a practice where a particular illness or treatment is diagnosed, and thereby coded on the bill as a more serious condition. For example, Prime hospitals frequently "upcode" simple urinary tract infections to sepsis, a more serious condition that is potentially fatal.
"Upcoding" allows Prime to collect more money because higher coded illnesses pay more and/or justify longer stays. Sometimes Prime also asserts lack of stability for transfer due to the false assertion of the more serious illness.
This illegal upcoding is done pursuant to direction from Prime and Prem Reddy. For example, a former Desert Valley coder testified that Prem Reddy himself held meetings in which he directed physicians and staff to “code records based on the payor” and that if “a patient has come in with COPD exacerbation, (Prem Reddy) said those are respiratory failure.”
Likewise, “people who have a UTI, those are sepsis. People who have … chronic renal failure, they’re in acute renal failure if they’re in the hospital.” “(The coders) would tell Prem Reddy we can’t make that decision on our own, it needs to come from a doctor. He goes, well, you need to go to the doctor and you need to tell him this is respiratory failure. … He said the doctors don’t know what pays better and so we need to help them so that they know what the true diagnosis should be.”
Examples of diagnoses that are upcoded at Prime hospitals are sepsis, septicemia, heart failure, respiratory failure and unstable angina. The frequency and severity at which these hospitals submit upcoded DRGs once Prime acquires them can only be explained by a directed pattern and practice to deliberately overcharge by false billing.
Prime has denied the allegations, and the case is pending.
August/September 2005, testimony of Tina Buchanan, former chief nursing officer, Desert Valley Hospital, San Bernardino County Superior Court, Victorville:
Q: Did anyone from billing and coding come to talk to you about Doctor Reddy's involvement in the billing and coding offices?
Q: Who was it that came to see you about that?
A: Sue Riggins was the director of medical records. She was responsible for the coders. I know that Doctor Reddy was having many, many, many meetings with the coders. She came to talk to me about him asking them to do illegal things.
Q: What did Miss Riggins tell you?
A: She told me that he was telling them that they needed to learn to, what we call, "up-code," meaning when a patient came in with a diagnosis of, say, chest pain, they needed to learn to add different things to that patient's diagnosis so his reimbursement would be better.
Q: Is that illegal?
Q: How many conversations did you have with Miss Riggins?
A: I had several conversations with her, and my advice to her was to speak to the CFO Jason Barker and Lex Reddy because I believed that was their area of expertise and responsibility. Sue continued to confide in me, asking for advice and help.
Q: Did you speak to anyone about this issue other than Miss Riggins?
A: I was actually in a meeting or two where Doctor Reddy was yelling at the coders and telling them they were stupid idiots, they needed to learn this. I did question him about doing it and why it was being done because it moved eventually into the emergency room.
Q: What did he say when you questioned him about "up-coding"?
A: He said it was his hospital and he could do anything he wanted to do.
Q: Do you know somebody named Janet True?
Q: Did Miss True ever speak to you about any issues in the coding or billing office?
A: She did. That was actually later. Miss True and I talked. She told me that some of the medical records were being altered.
Q: What was her job?
A: She was the manager – I don't know if it was manager or director of the business office responsible for sending out the hospital bills.
Q: What did she tell you was being altered?
A: Medical records.
Q: Did she tell you who was doing the altering?
A: Doctor Reddy.
Q: What did she say?
A: She said that they were sending bills to Medicare, and because the coders were told to up-code, the bills were going out, and Medicare was questioning the bills because the information in the medical record did not support all of the diagnoses.
Because there were so many inconsistencies, we were placed on what they call hundred percent Medicare review, meaning that Medicare wanted to look at every medical record with every chart. When Medicare would send a request back to get a copy of the medical record to justify the coding so they could pay the bill, Doctor Reddy would add things to the medical record to justify what had been billed.
Q: What did you tell Miss True she should do?
A: I told her she needed to talk to Lex Reddy and the CFO. That was their area of expertise and responsibility.
Q: Is the alteration of medical records to support an up-coded medical bill illegal?
Q: Did Miss True ever tell you whether or not she, in fact, spoke with Lex Reddy or the CFO Mr. Barker?
A: I don't remember. I know she was with them all the time, but I don't remember her telling me she spoke to them about this.
August/September 2005, testimony of Sandy Barber, former coding supervisor, Desert Valley Hospital, San Bernardino County Superior Court:
Q: During this meeting, did any of your employees become upset?
Q: What happened? What caused the employees to become upset?
A: Doctor Reddy began to look at a chart of one of the other coders, and he didn't like the way she had coded the chart. She took the chart and began to explain to him how she coded this chart. He became very angry and wouldn't really even let her speak to the way she coded the chart. He became angry with her and started yelling. She had a chart in front of her on the table in the boardroom, and he started slamming his hand on this chart in front of her face, and she asked him to stop. And he proceeded to let us know that Desert Valley Hospital pays our salaries and that he's Desert Valley Hospital.
Q: What happened to this coder that was being yelled and screamed at by Doctor Reddy?
A: Eventually, lunch came; so the meeting was ended, and she was having tachycardia, increased heartbeat, and she was not feeling well, having shortness of breath. So we went to the compliance officer, which was down the hallway a little bit from this boardroom. We were going to make a complaint with compliance, but since she was feeling so poorly, we proceeded to take her to the ER at Desert Valley.
Q: What happened there?
A: There she was seen by the ER physician, and she was admitted to the hospital.
Q: Do you remember having a meeting with your coding supervisor and swearing at her and using all manner of profanity, Doctor Reddy?
A: At what time? Who was coding supervisor? When is this time frame, sir?
Q: Sandy Barber in the Summer of 2001.
A: I already testified to you I don't even remember this lady. There was a lady by the name of Sandy. I don't know whether she was certified coder or not. I don't know whether she was supervisor or not. If this is the lady, I remember a Caucasian, meaning white, lady. I remember she used to come to me wanting to talk to me at times, but I don't know if she was a coding supervisor or any supervisor. I don't know whether she's certified person or not.
Q: I think you have the right woman from your description, Doctor Reddy.
Do you recall meeting with her and the coders, yelling and screaming at them, using profanity at them to the point where one of them was taken out and taken to the ER with chest pain?
A: I remember my first meeting with group of coders. I said, "I want to know this coding problem. I want a meeting with the coders." Unbeknownst to me, there was this group of large number of women. It was a heated discussion. I would ask, "what is this machine?" I was trying to learn the machine called 3M coding machine. 3M is a company, as you know. One lady said, "Oh, that is the maximizer," one lady said. "No way. You can't call it maximizer. That's illegal," another one said, "What do you call it then? Optimizer?" and they both look like the same to me. They're trying to do the right thing.
Then one lady got very anxious and got an asthmatic attack. And she's a known patient of bronchial asthma.
From then on, I never met that many of coders. I always only talked to one, Patty the coder. And I never met with that group of people again.
August/September 2005, testimony of Janet True, former director of patient financials, 1994 to 2004, Desert Valley Hospital, San Bernardino County Superior Court:
Q: Tell us what Doctor Reddy was discussing with you at these meetings.
A: How to maximize reimbursement based on medical coding.
Q: Can you recall or describe for us Doctor Reddy's demeanor or attitude at any of these meetings that come to mind.
A: I'm not really sure what you mean.
Q: How did he behave toward you and toward others at these meetings?
A: He basically ordered us to do what he was requesting as far as making sure that the maximum reimbursement was in order based on the medical codes. It was more directed towards medical records than myself.
Q: And was it in those meetings that Doctor Reddy would discuss maximizing the Medicare coding?
A: All coding, yes.
Q: What did you understand Doctor Reddy to mean by maximizing the coding?
A: To use the highest code for the maximum reimbursement. I believe Doctor Reddy referred to it as thinking outside of the box.
Q: Did Doctor Reddy tell you to code the maximum reimbursement possible even if there wasn't supporting documentation in the chart?
A: Doctor Reddy never told me to code. I was not a coder. That was not my function.
Q: During these meetings when Doctor Reddy was talking about maximizing reimbursement, did he ever say anything in your mind that you believed to be illegal?
A: I believed it to be questionable.
Q: Meaning you don't know?
A: Meaning I felt it was.
A: Yes. I felt we could be fined for it.