Contingency Fee Billing Is It an Endangered Species?

Contingency Fee Billing Is It an Endangered Species?

Contingency Fee Billing Is It an Endangered Species?

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Special to ADVANCE

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) recently investigated irregularities of laboratory billing practices of Ohio hospitals, which was referred to as the “Ohio Hospital Project.” This project has resulted in a Fraud Alert targeting contingency fee consulting companies.

The Fraud Alert, issued in January, discusses recent findings from the “Ohio Hospital Project” involving laboratory billing irregularities under the so-called “Lab Unbundling Project.” As of mid-December, that civil investigation into Medicare and Medicaid billing practices has recovered $6.6 million from 17 Northern Ohio hospitals. The American Hospital Association (AHA) has warned that enforcement action will be expanded to include 5,000 hospitals.

The Ohio Hospital Association (OHA), in conjunction with the AHA, has filed suit against the federal government regarding the “Ohio Hospital Project,” contending Medicare failed to advise hospitals of rules for submitting bills for certain laboratory tests until 1994. The suit further contends that the fiscal intermediaries have been paying the claims for many years and therefore have accepted the billing claims submitted.

The suit seeks a court order to stop HHS from retroactively applying billing policies that were not properly established or communicated. A motion to dismiss has been filed by the government and remains pending. The outcome of this litigation, however, has absolutely no impact upon the validity of the Fraud Alert.

The Fraud Alert notes that department heads of several Ohio hospitals were interviewed during the “Ohio Hospital Project” investigation. They indicated that there are a number of consulting firms that offer to “maximize” billings for radiology, emergency room and laboratory services by “discovering and correcting coding errors for a percentage” of the Medicare revenue increase.

The Fraud Alert specifically addresses consulting firms that engage in “maximization” and charge contingency fees in the outpatient setting. However, the Fraud Alert may be interpreted to apply to the inpatient arena as well. The extent to which the OIG will target contingency fee consulting companies beyond billings for radiology, emergency room and lab services is unknown. Consulting firms that engage in contingency fee billing, in the inpatient or outpatient settings, are well advised to immediately review their billing practices. This will ensure that the pecuniary motive is not interfering with audit conclusions, resulting in “maximization.”

The HHS/OIG recent Fraud Alert is not the first review of “maximization” schemes by contingency fee consulting companies. The Metzinger case filed by the U.S. Attorney’s Office in 1994 is noteworthy. There, the government, pursuant to the False Claims Act and the Anti-Kickback Act, alleged that Metzinger Associates participated in a “maximization” scheme utilizing a computer program that automatically produced Medicare claims for services. The services, according to the complaint, were either duplicative of services previously billed or were never performed. In other words, Metzinger Associates was “upcoding,” “unbundling” and “rebundling” laboratory procedures. This, according to the complaint, occurred at 200 acute care hospitals in 17 states. Noteworthy is the fact that several of the hospitals were also named as defendants.

The contingency fee billing arrangement provided for payment of up to 50 percent of the net increase of outpatient clinical laboratory billings. In addition, Metzinger Associates would allegedly pay consulting fees to client hospital administrators who referred other hospitals.

The Metzinger case remains in litigation. Regardless of the outcome, it is clear that the U.S. Attorney’s Office has a serious concern with the contingency fee arrangement.

The contingency fee arrangement is not per se unethical. However, it creates the appearance of impropriety. A contingency fee arrangement in conjunction with “a maximization scheme,” as alleged in the Metzinger case, is illegal and violates the False Claims Act when claims are submitted or caused to be submitted by the consulting company.

Consulting companies that are currently involved in these fee arrangements need to review their present fee structure. Consideration of a “flat fee” or an hourly rate would be advisable.

Regardless of the fee arrangement, consulting companies must have quality control programs in place, and they should begin moving toward the implementation of a corporate compliance plan. Providers, as a result of the Physicians at Teaching Hospitals (PATH) Initiative and other investigations emanating from Operation Restore Trust, now realize the absolute necessity of corporate compliance plans. The Fraud Alert is notice to the health care consulting community that contingency fee billing structures will be scrutinized by the government when Medicare/Medicaid is involved.

Hospitals must review their relationships with health care consulting companies. Paranoia is not the solution. Legitimate opportunities based upon initial coding errors, lack of proper documentation (incomplete medical records) and unskilled billing/coding staff should not be ignored.

Inadvertent “underbillings” and “overbillings” are common. Of course, the government is not concerned with underbillings. Providers must hire credible, ethical, credentialed consultants who perform services with a quality control component. Only then will billing submissions be accurate, credible and defensible.

* About the author: Joseph J. Russo is general counsel for Cabot Marsh Corp., a national health information consulting company headquartered in Bethlehem, PA. He is a member of the New Jersey, Pennsylvania and District of Columbia Bars.

HHS OIG Medicare Fraud Alert #97-01.

5 HLR 1828, 12/19/96.

Ohio Hospital Association vs. Shalala, DC N Ohio, No. 1:96-CV-2165, filed 10/7/97; 7 MCR 1179, 10/11/96.

United States vs. Metzinger, et. al., DC E. Pa., No. 94-CV-7520, filed 12/15/94 (amended complaint filed 2/20/96).

False Claims Act, 31 U.S.C. Sec. 3729, et. seq.

Anti-Kickback Statute, 41 U.S.C. Sec. 52.