UW regents may be close to settlement

University of Washington regents are moving toward approving a $35 million settlement in the overbilling of Medicare and Medicaid by UW doctors, despite deep unhappiness about the agreement, according to sources close to the negotiations.

The regents have been told that rejecting the settlement likely would result in a public trial rather than new negotiations, prolonging a scandal that already has gone on for 4½ years, sources said.

The regents' consideration of the settlement comes as a UW doctor convicted of criminal conduct in the case is pointing his finger at his onetime bosses, writing in a scientific journal that they failed to establish adequate compliance programs and even had a possible financial incentive to ignore problems.

Attorneys for the UW and the federal government reached a proposed settlement Jan. 12, tentatively resolving a dispute over the extent to which UW doctors submitted false billings to Medicare, the federal health-care program for people 65 and older, and Medicaid, the federal-state program for the poor.

But the penalty, which would be a record nationally for a medical school, requires the approval of the UW regents.

The regents met behind closed doors Jan. 16 to discuss the proposed settlement. Some regents expressed anger over what they viewed as an excessive and unwarranted payment, but the board did not reject the agreement, sources said.

The deal has generated particular consternation at the UW, the sources said, because the penalty would be the largest in the government's 10-year crackdown on Medicare and Medicaid overbilling at teaching hospitals nationwide. The largest penalty to date is $30 million, imposed in 1995 on the University of Pennsylvania.

Nonetheless, federal officials were officially notified by UW attorneys after the board's meeting that the agreement had not been rejected and was likely to be approved after some details were clarified, the sources said.

Neither side will publicly comment because of a gag order imposed on the parties by a judge overseeing the settlement talks.

The proposed $35 million penalty, confirmed by people familiar with the negotiations, would be paid from patient fees collected by UW doctors in their clinical work, as well as nontaxpayer funds from UW Medicine, the umbrella organization for all of the university's medical facilities.

The case stems from a whistleblower lawsuit filed under seal in 1999 by a former UW employee, Mark Erickson, who alleged massive overbilling of Medicare and Medicaid by UW doctors in the 1990s. Erickson stands to collect 15 to 25 percent of the settlement under a Civil War-era law that encourages whistleblowers to report fraud against the government.

The suit, which remains under seal, triggered a lengthy criminal investigation that led to the felony convictions in the past two years of two prominent physicians.

Dr. H. Richard Winn, a neurosurgeon, pleaded guilty to obstructing the investigation, and Dr. William Couser, a kidney specialist, pleaded guilty to submitting a fraudulent bill to a private health provider.

While the suit's contents haven't been disclosed, Dr. Winn, who headed the UW neurosurgery department for 20 years, recently laid out his view of what occurred in a lengthy article in the January issue of the Journal of Neurosurgery. In it, Winn acknowledged significant billing lapses but blamed them on sloppy procedures rather than criminal behavior.

Winn wrote that doctors like him were focused on "academic ... and human-resources issues and, by design, were not responsible for the day-to-day oversight" of billing duties that were delegated to others.

Winn, who was forced to resign from the UW and now is a researcher at Mount Sinai School of Medicine in New York, was required to write an article on his conviction as part of his criminal sentence.

He also was placed on probation, required to perform community service and ordered to pay $500,000 for overbillings that prosecutors acknowledged were the result of "mistake and confusion."

In the article, Winn asserted that before the federal investigation, "There were no (or limited) faculty educational compliance programs and no mandatory training sessions for existing or new faculty or other employees."

Among various breakdowns, Winn cited one in which the UW retroactively billed Medicare in 1996 and 1997 for doctors who assisted primary surgeons. In an academic setting, such billing is allowed only when the surgery is complex and when a resident in training is unavailable to help.

Residents, who are paid a salary, are not allowed to bill Medicare or Medicaid. "Unfortunately," Winn wrote, billing officials "instead collected the charts of all patients — not just those of complex cases — " and submitted all them, "even for minor procedures."

Additionally, according to Winn, taxpayers were improperly charged for bedside and surgical procedures purportedly performed by attending physicians. The procedures actually were carried out by residents.

Winn also suggested that top officials of the UW Medical School had a reason to not pay close attention to billing problems: a "dean's tax" that allowed the school's dean, Paul Ramsey, to collect 11 percent of all patient revenues to use at his discretion for medical operations.

Calling the tax a "potential conflict of interest," Winn wrote that it "may conceivably lead to corporate incentives that are in conflict with individual physician activities and compliance responsibilities."

UW officials declined to comment on Winn's article. But one, who asked not to be identified, noted that all medical schools have such funds, and that the UW's mistakes also resulted in the underbilling of Medicare and Medicaid.

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