Prosecutor: UW staff destroyed damning documents

University of Washington employees destroyed audit reports that revealed its doctors submitted inflated billings to Medicare and Medicaid, according to a letter by John McKay, the U.S. Attorney in Seattle.

In a January 2002 letter to the university, McKay, the top federal prosecutor in Western Washington, alleges that UW employees failed to disclose serious billing irregularities turned up by internal audits, did not repay the government for the overcharges, and destroyed documents about the improper payments, now estimated at millions of dollars.

UW officials said yesterday that the alleged activities occurred before federal investigators began a criminal investigation of UW medical school billing practices in 1999.

"Prior to the investigation, some billing errors were detected where, due to miscommunication, no repayment was made," said L.G. Blanchard, spokesman for UW Medicine. Some audits "were destroyed in the ordinary course of business."

He said it was "completely false" that employees "intended to hide billing errors." He identified them only as mid-level managers.

He said most of the audit data were not actually lost, but kept in a different record-keeping format.

In a related development, Dr. H. Richard Winn, convicted of a felony in the investigation, has been hired by the Mount Sinai School of Medicine in New York City. The hiring may save the UW up to $2.75 million of a settlement it reached with Winn when he pleaded guilty and resigned.

The government's investigation has uncovered evidence that UW doctors routinely overbilled Medicare and Medicaid for years, costing taxpayers millions of dollars. Another doctor is engaged in plea talks with prosecutors, and the UW is awaiting what is expected to be a multimillion-dollar civil penalty for overbillings.

McKay's two-page letter, written on Jan. 9, 2002, was obtained yesterday by The Seattle Times from the UW. Officials released one paragraph and deleted parts of the letter that they said dealt with matters that had to remain confidential.

In the letter, McKay discussed UW Physicians (UWP) and Children's University Medical Group (CUMG), two nonprofits that collect fees for UW doctors who perform clinical duties at UW medical facilities, Harborview Medical Center and Children's Hospital & Regional Medical Center.

"Evidence developed during the investigation shows that UWP and CUMG became aware of significant billing or documentation irregularities that affected the right to reimbursement to the federal payers and failed to disclose these irregularities or make reimbursement to the federal payers," McKay wrote.

"In addition, evidence shows that UWP and CUMG undertook efforts to destroy audit reports that revealed such irregularities."

McKay did not identify any individuals believed to have destroyed the reports and declined to comment on the letter yesterday.

No charges have been filed regarding the destruction of the records.

The UW said it has improved how it bills the government for Medicare and Medicaid reimbursements.

Winn, 60, who pleaded guilty in July to a felony charge of obstructing the government's investigation, admitted that he asked others to lie for him and created an atmosphere of fear in the UW neurosurgery department.

Under the agreement to leave the UW, Winn was guaranteed $750,000 for one year, plus $200,000 for his legal costs. If he was unable to find a suitable job after that, the UW agreed to pay him $750,000 for the second year and $500,000 annually for next four years.

The UW said it would have cost more to forcibly oust Winn, a tenured professor.

How much Mount Sinai will save the UW won't be known until September, when Winn is required to disclose his new salary. The UW will make up the difference if Mount Sinai pays him less than the annual settlement amounts.

"We are pleased that he has found new employment," Blanchard said.

Mount Sinai officials and Winn's attorney, Cyrus Vance Jr., declined yesterday to disclose what he will be paid in his new post.

Debra Kaplan, spokeswoman for Mount Sinai medical school, said school officials were aware that hiring a convicted felon could generate controversy, but "his value as a researcher is worth a lot."

Winn will join the faculty as director of neurosurgical research in June.

"The main reason we've recruited him is as a researcher," Kaplan said, citing his excellence as a medical investigator and the promise for medical breakthroughs in his work.

It is still an "open question" whether Winn will perform brain surgeries and clinical work, Kaplan said. She said it is unclear if Winn will teach medical students.

Winn is still working with Washington state officials to keep his medical license, which is likely. Prosecutors and the judge who sentenced him recommended that he keep his state license.

As part of his plea, Winn paid $500,000 to Medicare, Medicaid and a U.S. Defense Department health-care program for the inflated billings. Prosecutors did not charge Winn with deliberately submitting false bills, saying he made mistakes based on confusing rules.

His agreement angered some on the UW medical-school faculty because the payments to Winn are to be made by UW Physicians.

No taxpayer money was directly included in the settlement.

Winn could not be reached for comment yesterday. He has been in Nepal since March 10, where he is completing 1,000 hours of community service at a hospital as part of his guilty plea.

At Mount Sinai, Winn will take with him a federal research grant he began 20 years ago and that has made him famous in medical circles.

His work could lead to better treatments for strokes, brain injuries and epilepsy, said Dr. Tom Jacobs of the National Institutes of Neurological Disorders and Stroke.

Winn's ability to get the UW to release the grant, which totaled $350,000 this past year, was key in securing the position at Mount Sinai. The transfer of the grant still must be approved by NIH, but that is expected, Jacobs said.

Winn is looking forward to his new position and continuing his "life-saving research," Vance said.

Steve Miletich: 206-464-3302 or smiletich@seattletimes.com