As many hospital administrators and government bureaucrats are discovering, Rick Newbold, M.D., 52, is not someone who can be easily dismissed.
After years of being rebuffed when he tried to persuade hospitals that a software analytical tool he developed could detect fraud and errors, reduce costs and help hospitals make clinical comparisons with other hospitals, Newbold decided to play hardball.
The latest crusade by the Philadelphia-area doctor-turned-entrepreneur drew more attention than his salesmanship did. It may also prove more costly to Newbold and the 100 hospitals he has sued under the federal False Claims Act.
Eight hospitals have settled Medicare fraud allegations with the U.S. Justice Department and HHS' inspector general's office for more than $15 million. Though nearly $2 million of that goes to Newbold for bringing the alleged fraud to the government's attention, Newbold says his notoriety has cost him future sales of his software product.
Without admitting legal guilt, the hospitals settled civil charges that they overbilled for treating thousands of pneumonia cases.
Unlike other whistleblowers, Newbold never worked at any of the hospitals he sued. In fact, he had never set foot in most of them. He is among the first of what some are calling "professional qui tam relators," or whistleblowers who don't work for the healthcare organization they're suing. Thus, they don't bring firsthand knowledge of the alleged fraud against the government.
Newbold's suits have stirred a volcano of protest from hospitals and healthcare lawyers, who charge he has violated ethical codes and lacks standing as an original source in filing the suits. He sued at least one of the hospitals where he had demonstrated his software.
`A dangerous man.' Newbold, though, points to what he calls incontrovertible evidence of billing abuse. He peddled the software product of the company he founded, Health Outcomes Technologies, to a half dozen hospitals, health systems and government offices, including HCFA. He wanted to show how healthcare organizations could reduce exposure to billing errors, better comply with state and federal laws and benchmark themselves against other hospitals.
"I was willing to give this tool away," Newbold recalls. "Some considered me an adversary from the beginning. I was perceived as a threat. They were afraid of me and the information I had. I'm a dangerous man because I have delusions of relevance."
Newbold remembers being threatened and thrown out of offices.
"I was told I was only a doctor, a nobody who could teach them nothing."
Stumbling on upcoding. Newbold says he filed the suits only to facilitate change in the behavior of healthcare organizations. While working as an analytical research consultant to the pharmaceutical industry in the late 1980s, he began tracking the efficacy of certain drugs and the true cost of caring for patients with specific conditions. In doing so, he stumbled on the pneumonia upcoding phenomenon.
While analyzing information gleaned from publicly accessible databases such as those of HCFA, the Department of Veterans Affairs, public hospitals and Medicaid, he discovered anomalies in hospitals' wide-ranging billing practices.
He learned that from 1993 to 1994 serious bacterial pneumonia cases constituted 2.6% of all pneumonia cases billed under Medicare. Newbold alleges that the hospitals he sued billed Medicare for treating 34.6% of all the pneumonia cases as serious pneumonia, a rate more than 10 times higher than the national average. Those hospitals billed for an abnormally high incidence of unspecified or unknown bacteria, which drives pneumonia into complicated conditions.
The difference in Medicare reimbursement between simple viral pneumonia and serious pneumonia amounted to about $2,420 per hospitalization, according to the original complaint.
"This was a touchy deal with the federal government," recalls an HHS employee, who requested anonymity. "It looked like there was an epidemic that no one knew was happening. Everyone was very concerned. Even (the federal Centers for Disease Control and Prevention) wondered what was happening."
It turned out to be a billing epidemic. Newbold's research and data analysis showed what hospitals were doing and how they were gaming the system, the government official says.
Consultant-borne disease. Newbold characterizes healthcare fraud in epidemiologic terms as "a consultant-borne disease" spread by billing consultants. He says hospital and health system officials allow it to propagate even though they know they are doing wrong.
James Sheehan, who heads the civil division of the Philadelphia U.S. attorney's office, predicts the pneumonia diagnosis cases could be only the tip of the potential litigation iceberg.
"There are probably 20 different DRG pairs and clusters that this (software) technology would lend itself to," he says.
Newbold is a complex and unpredictable man who talks a mile a minute and immerses himself in widely ranging interests. He is a musician, a scientist, an entrepreneur, an actor, a linguist, a philanthropist and a businessman. He has been married to his French-born wife, Daniele, for 24 years and has three children.
He earned a master's degree in statistics and a medical degree from the Medical College of Pennsylvania. He dropped out of a pathology residency program after six months. Practicing medicine no longer excited him, he says.
After first demonstrating his software for Sheehan's office, Newbold and his lawyer, Michael Holsten of the Philadelphia firm Drinker, Biddle & Reath, began filing suits in 1995.
Newbold left another software company he founded, Health Process Management, last summer, settling with investors and the board of directors. They saw his continuing presence as a conflict of interest that would hurt business.
Health Process President Cliff Carroll says he admires Newbold, calling him "a kind of a genius," but also distances himself from Newbold, who hired him. "We do not do (whistleblower) lawsuits," Carroll says.
Health Outcomes Technologies exists only on paper. But Newbold continues to work on software analytical products through a new company he founded, Healthcare Financial Analytics.
Sheehan says Newbold's discovery and subsequent lawsuit had a great impact on hospitals' behavior, not just on the settlement monies returned to the Medicare Trust Fund. He says billing for complex pneumonia has dropped dramatically.
What bothers Newbold most about the criticism is that he thinks it's intended to cloud the wrongful behavior.
"They're making me the issue," he says. "People still don't understand that what they did was wrong. In blaming me, they are avoiding taking responsibility."
He says cheating on billing is a cancer on the provider and payer world.
"We're all paying the price. All of us in healthcare are making our living off the infirmities of our fellow man. We must never forget where those dollars come from."