Justice Department joins whistle-blower suit against IPC the Hospitalist Co.

Dr. Bijan Oughatiyan says he was confused at first when a Medicare auditor called him to task for his high rates of expensive procedures.

Employees of the government-contracted auditing company, TrailBlazer Health Enterprises, told Oughatiyan that his data showed he was billing Medicare for too many high-cost hospital admissions and procedures, forcing him to attend an education program on accurate billing. But the things he learned in that 2005 Medicare class, he says, directly contradicted the training he received from his employer at the time, IPC the Hospitalist Co.

That disconnect, Oughatiyan alleges in a federal lawsuit, was no accident.

In a whistle-blower lawsuit (PDF) filed in U.S. District Court in Chicago in 2009 and unsealed this week, Oughatiyan says IPC coached its hospital-based doctors to systemically use higher-paying Medicare codes than were appropriate given the services provided. The company closely monitored how its hundreds of doctors billed Medicare, and it used profit-sharing to reward those that billed at the highest levels for hospital admissions and evaluations and treatments of patients, the lawsuit says.

The U.S. Justice Department announced this week that it has joined the lawsuit, which means the government now has four months to file its own complaint against IPC based on the whistle-blower allegations and its own investigation into alleged False Claims Act violations.

A spokesperson for the North Hollywood, Calif., company said IPC could not comment on an “ongoing matter.”

The publicly traded company informed shareholders Dec. 6 that it had first received a demand for documents related to the case in June 2010, involving Medicare and Medicaid claims between January 2003 and June 4, 2010.

“We have cooperated with the government's investigation and have entered into preliminary discussions with the federal government regarding resolution of the investigation and related case,” the Dec. 6 noticed filed with Securities and Exchange Commission says.

IPC's most recent annual report, covering 2012, said the rapidly expanding 15-year-old company employed about 1,400 doctors, nurses and physician assistants who provided hospitalist medical services under contract at more than 350 hospitals and 810 other inpatient and post-acute facilities.

The company posted net income of $33 million on operating revenue of $523 million in 2012. About half of the revenue came from Medicare and Medicaid.

Oughatiyan's lawsuit alleges IPC officials were aware of Trailblazer's suspicions about upcoding by IPC doctors. An internal memo was sent to company executives that said, “Trailblazer is at it again in Texas,” according to the complaint. The memo said the auditing company was trying to decrease IPC's reimbursements and that IPC doctors should “maintain their appropriate coding pattern,” the lawsuit says.

IPC officials also told Oughatiyan, according to the lawsuit, that Trailblazer's audit findings failed to take into account “the high-level nature of work performed by hospitalists relative to the typical internist.”

Although 12 states were suggested as potential co-plaintiffs by Oughatiyan, all of them, including Illinois, declined to intervene in the case.

Follow Joe Carlson on Twitter: @MHJCarlson