Three years ago, when Redinque Memorial Hospital found itself in financial trouble, it hired Allan Hale as a senior administrator for his experience in revitalizing a large non-health care corporation. In reviewing hospital billing practices, Hale immediately noticed that the coding of a given medical condition significantly affected reimbursement. He instituted new policy such that, whenever there was an ambiguity in a patient's diagnosis, clerks would enter the most remunerative code possible.
Hale also found the billing department too cautious in its reimbursement claims for expenses such as interest charges for the facilities under Medicaid and Medicare programs. He directed that whenever there was any doubt, staff should claim the maximum amount. As a realist, however, he instructed accounting personnel to develop two financial plans: one to incorporate the reimbursements claimed under the aggressive approach; the second to assume that many of those claims would be disallowed.
This case raises questions of law and corporate compliance ("Business Conduct," in Advocate terms). Perhaps Mr. Hale thinks, "This is how the health care reimbursement game is played," but his approach is likely to result in numerous violations of federal law. Routine "upcoding," or seeking the most remunerative way to code a procedure, is an easily detectable practice often targeted by government investigators. Since distinctions between codes are based on the severity of a medical problem, coding a condition under a more severe heading constitutes fraud.
Further, federal health care laws uphold a strict standard of honesty in making claims. If a claimant seriously doubts the legitimacy of a claim, it should not be submitted. Moreover, while making best- and worst-case financial plans can have some legitimacy, the existence of two plans and two sets of supporting records has been used by prosecutors as evidence of bad faith. If Redinque's records betray doubts about reimbursables, regulators might infer that senior management knew certain claims were inaccurate. If government investigators discover billing irregularities, Redinque could face substantial fines and possible exclusion from all federal health care programs.
The legal and financial jeopardy created by this conduct might have been avoided by attention to ethical as well as legal dimensions. Ethically, the essential duplicity of the aggressive approach should have been an immediate sign of trouble. Practices that require a pattern of duplicity to succeed are always questionable and should be avoided.
