When Fraud Falls on Deaf Ears, Can You Blow the Whistle?
By G. John Verhovshek, MA, CPC
In the spring of 2003, Columbia/HCA agreed to pay $631 million in civil penalties and damages for filing false claims to Medicare, along with an additional $250 million to resolve overpayment issues. Several years earlier, in late 2000, Columbia/HCA pled guilty to related criminal charges, for which the company paid $840 million in criminal fines, civil restitution, and penalties. In total, the largest and lengthiest health care fraud investigation in the nation’s history netted a return of nearly $1.7 billion for the federal government, and caused a huge shakeup at one of the country’s largest health care conglomerates.
A major player in the drama was John W. Schilling, an otherwise unassuming accountant who had served as Columbia’s Southwest Florida Medicare reimbursement supervisor during the mid-1990s. Schilling uncovered major problems in the company’s cost reporting, which lead to windfall payments from Medicare. Repeated attempts to correct the problems through the proper chain of command produced no results, and Schilling realized to his dismay that his superiors seemed to be acting purposefully to perpetrate the errors.
Feeling that his personal ethics and responsibility as a certified professional accountant (CPA) were at odds with his employer’s expectation to “look the other way,” and failing to convince his superiors to do the right thing, Schilling made the difficult decision to become a whistleblower and reported Columbia’s accounting irregularities to federal authorities. For much of the decade that followed, Schilling was embroiled in the resulting investigation, serving as an FBI informant, testifying on behalf of the Justice Department, and coming under scrutiny himself.
Schilling currently is a partner with EthicSolutions LLC, a consulting firm that specializes in providing confidential direction and advice to whistleblowers and potential whistleblowers, and assists law firms and the federal government with civil and criminal fraud cases. Schilling wrote about his role in the Columbia/HCA case in Undercover: How I went from Company Man to FBI Spy—and Exposed the Worst Healthcare Fraud in U.S. History. He agreed to share some of his experiences, and how they are relevant to coders in the medical environment, with Coding Edge.
Coding Edge (CE): You began working in Columbia’s Fort Myers regional office in 1993, overseeing Medicare cost report filings and coordinating audits with the fiscal intermediary. At what point did you recognize irregularities with Columbia’s accounting?
Schilling: About six months after I started, I had to address how interest expense was handled at one of my hospitals, Fawcett Memorial. Interest expense could be classified either to operating or capital outlays. By over-representing the portion of costs allotted for capital purposes, the hospital received higher reimbursement from Medicare. That is, costs were inflated by including non-reimbursable expenses, and as a result the hospital had received Medicare payments to which it technically was not entitled.
When I began reviewing other reserve issues, aside from the interest issue, I realized many of them were suspicious. Being new, however, I initially assumed—and was told repeatedly—that this was the “normal” course of business.
CE: When you knew for sure that there were problems, how did you handle it? Did you notify superiors or take steps to address the irregularities?
Schilling: Shortly after I noticed the improper cost allocation and brought it to my boss’s attention, I was invited to a meeting with three company executives, including my immediate supervisor, in which this “Fawcett Interest Issue” was discussed. Although it was characterized as a legitimate accounting mistake, it had led to windfall payments for Fawcett Memorial. At the meeting, there was open discussion of how the mistake could be hidden, so those payments would not have to be repaid. I knew then something wasn’t right.
A new manager came into place, reviewed the same reserve documents I had, and likewise concluded many of the reserves were improper if not fraudulent. My new manager and I expressed our concern to upper management, both separately and together. I also wrote memos and provided documentation that went to the director and assistant vice president of our department, showing them a number of reserves I believed to be improper. But nothing happened. Six months later, new management above my manager and me reviewed the issues, and indicated they were not going to reimburse Medicare retroactively for any overpayments. They felt they had no responsibility to self-report, and if the government didn’t discover the error, it wasn’t a problem.
CE: What did you think when those you were reporting to ignored or even seemed to encourage the practices you knew to be inappropriate? What made you decide, finally, to become a whistleblower?
Schilling: I felt self-doubt and frustration, but also thought I might be over-reacting. Very few people within the company seemed concerned with the reserve issues, and it seemed to be normal practice within the industry. On the other hand, I knew what was being done was unethical, if not illegal. And I was frightened. I became concerned that if I went along with these practices, I may be jeopardizing my CPA license, and possibly even facing jail time. After months of debate, I knew I couldn’t just look the other way. I had to do something.
CE: Acting as a whistleblower was not as easy as just telling your story. You were deeply involved in the case for nearly a decade. Did you doubt your decision?
Schilling: I often doubted that I was doing the right thing, or if it was worth the effort. I was intimidated. I had been told “jobs could be lost” if anyone found out about the costly accounting errors. I feared for my own job and reputation. The prospect of physical harm remained in the back of my mind. I uprooted my family, and accepted a job in the public sector at 25-35 percent less pay than I had been making, at a time that I was the sole wage earner. I spent hundreds of hours away from my wife and children each year, in meetings with attorneys and government prosecutors, educating them on the issues, reviewing documents, and preparing for trial. As the criminal trial approached, I had renewed doubts. My decision could send people to jail—people I had worked with and known personally. The case was under seal for years: I wasn’t allowed to discuss it with anyone—even my spouse. I had to distance myself and withhold the truth from family and friends and co-workers. It put a strain on every relationship in my life.
Overall, I’d say it was quite an emotional roller coaster.
CE: The Columbia/HCA case ended with a huge settlement for the government. As a whistleblower, or qui tam relator, you shared in that settlement. How was it decided what your share should be?
Schilling: One would think the government would have an objective process to determine a whistleblower’s reward, but they don’t. Even if you are a team player up to the settlement, you will be forced to battle those with whom you worked side-by-side to obtain your settlement. Even though the law stipulates the relator is entitled to 15-25 percent, the Justice Department is reluctant to reward more than the minimum. The average is 17 percent. You must engage in a negotiation to prove your worth. It becomes a battle with the Justice Department to argue how instrumental you, as the whistleblower, were in obtaining the settlement. Being a whistleblower isn’t an automatic payday. It’s a challenge at every step. If your motive as a whistleblower is solely money or revenge, or if you haven’t got your facts and evidence in line, you’ll not likely get anywhere.
CE: The problems you saw at Columbia revolved around cost reporting and accounting issues, not coding. Does your experience apply to coders?
Schilling: Absolutely! Coders, like accountants, are obligated to properly adhere to Medicare rules and regulations. Whether it’s bookkeeping or coding claims, everyone on the reimbursement team has a responsibility. And, a certified professional coder (CPC®) agrees to abide by a code of ethics, just as a CPA does.
CE: Columbia/HCA was a large, multi-facility company. Are compliance issues as big a risk at small facilities, or the single-provider office? Are payers or government regulators really interested in the little guys?
Schilling: Yes. The government is interested in anyone committing fraud, whether big or little. From a practical perspective, the government has limited resources and can’t police compliance in all health care providers all over the country. As a result, they try to influence providers to self-report and police themselves. Their interest in the big fish is because there is the potential for larger settlements, and there is a much better chance there will be national publicity. This national publicity serves as a potential deterrent for others who either already are committing fraud or contemplating committing fraud.
But, compliance issues actually may be a bigger risk at smaller, single-provider offices because smaller entities do not have the financial resources to hire trained, experienced compliance professionals. They are more likely to rely on individuals who wear many hats—with compliance being a low priority. With increasing scrutiny of health care costs by payers, government, and consumers, compliance crackdowns will continue to trickle down to smaller and smaller providers.
CE: If I’m a coder in a facility or office, and I notice what I believe to be compliance or coding risks, what would you advise I do?
Schilling: Double check yourself. Review the facts and review the Medicare regulations to help you determine compliance. If you determine what you’re reviewing is non-compliant, you need to start internally. The coder should document the facts and evidence believed to be in violation, and report this to either a superior or the compliance officer, depending on internal protocols. It is imperative for the facts and evidence to be tangible and reported in a way that shows exactly why there is a potential violation—for instance, what regulation is in violation, and how and why it is being violated.
If repeated attempts to correct the issue fail or fall on deaf ears and the practice or facility refuses to correct the problem in spite of clear evidence that it exists, then reporting a violation in an attempt to force compliance is an option. As a partner at EthicSolutions LLC, I help provide confidential direction and advice to potential whistleblowers, and assist attorneys and government prosecutors in civil and criminal fraud cases. One of our current clients is a coder; unfortunately, I cannot discuss anything about this case because it is under a court seal.
There are places where you can get advice on how to proceed. The first step, however, always is to arrange your facts and to attempt to correct the problem internally.
CE: What about preventing compliance risks and improper coding: What influence can coders have, and do you see their role as expanding or contracting in the years ahead?
Schilling: Coders should be proactive in reporting areas that are a potential problem. Doing so will result in a culture change within the organization where compliance is continuously being discussed and reported. To keep compliance an active topic for ongoing discussion, coding compliance should be made part of the agenda of all coding department meetings, or at least on a monthly basis in meetings exclusively devoted to coding compliance. This proactive approach will result in coding compliance being part of the organization’s culture that could serve to prevent government intervention. Or, if there is government intervention for whatever reason, the government may be more lenient in dealing with the organization should they discover an area of non-compliance. Coders also should be advocates for self-reporting to the government should problems be discovered. This will serve the organizational well both short and long term.
Coders can have a significant influence on their organization’s compliance program to benefit the organization and the professional status of coders.
G. John Verhovshek, MA, CPC, is AAPC’s
director of clinical coding communications.