Beware of Automated or AI-Generated Billing Coding to Government Healthcare Programs: Hospital System Settles Upcoding Allegations

University of Colorado Health (UCHealth) recently paid $23 million to settle a False Claims Act (FCA) lawsuit alleging that several of its hospitals submitted inflated billing codes for hospital emergency department visits. The settlement resolves fairly common FCA allegations of upcoding, but it is notable because UCHealth applied automatic coding rules that purportedly departed from relevant coding standards. In addition, the Centers for Medicare & Medicaid Services (CMS) identified UCHealth as a “high outlier” for its use of the Current Procedural Terminology (CPT) code at issue. This highlights a growing use of data analysis in health care fraud cases. The allegations and settlement provide broader guidance for health care providers to reduce their risks in coding and then billing federal health care programs.

The relator was a certified coding specialist who worked at UCHealth. The relator filed an FCA case in 2021 alleging that a number of UCHealth hospitals falsely coded certain Evaluation & Management (E&M) claims submitted to the Medicare and TRICARE programs. After an investigation, the Department of Justice (DOJ) intervened for the purposes of settlement on November 12, 2024.

The settlement agreement explains that hospitals use E&M claims to bill for certain care provided in hospital emergency departments. There are five CPT codes that hospitals can utilize, depending on the level of services the hospital provides to patients. CPT code 99285 represents “the highest level of severity and corresponding hospital resource usage, requires a comprehensive history, a comprehensive examination, and medical decision making of high complexity, and typically involves severe medical conditions or needs.” This CPT code thus results in a higher payment to the hospital.

The Complaint alleged that while UCHealth adopted the American College of Emergency Physicians Emergency Department Facility Level Coding Guidelines to determine the correct E&M code to use for a patient’s emergency visit, the automatic coding rule applied by the billing system violated these standards. The Defendants allegedly developed and used a billing system that automatically coded E&M claims using CPT code 99285 (the highest code) whenever the number of times health care providers at the hospital checked a patient’s vitals exceeded the number of hours the patient stayed in the emergency department. UCHealth referred to this billing system rule as the “frequent monitoring of vital signs” rule. DOJ contends that this coding rule did not satisfy the requirements of the CPT code description for CPT 99285 and did not reasonably reflect the facility resources utilized by the UCHealth hospitals.

While UCHealth allegedly received complaints from coding employees about the automated coding rule that applied CPT code 99285 based on “frequent monitoring of vital signs,” it did not adjust its automated coding rules. In addition, CMS consistently identified UCHealth as a “high outlier” for use of CPT code 99285. Data monitoring showing the hospitals as outliers can suggest there may be coding issues and could demonstrate the hospitals’ knowledge of inflated codes.

While similar allegations are the frequent target of FCA cases, coding issues remain persistent. As a result, health care providers should remain vigilant to ensure their coding practices comply with relevant coding standards. The use of automated tools, as demonstrated here, requires additional diligence to verify that software logic, algorithms — or eventually artificial intelligence — apply the coding standards that providers have adopted. To reduce FCA risk, health care providers could take common sense steps, such as conducting periodic internal audits of automated tools and using data analysis to identify any trends that may signal a potential coding issue. Lastly, companies must take internal complaints seriously and address them promptly to avoid a situation where a concerned employee becomes a relator.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.