An Indiana hospital has agreed to pay $96,645 in a civil monetary penalty settlement over fudged physician signatures on admission orders. The settlement appears to be one of the first related to a recovery audit contractor (RAC) review.

Reid Hospital & Health Care Services, a 207-bed hospital in Richmond, self-disclosed to the HHS Office of Inspector General that it had backdated physician signatures on medical records submitted to the RAC, according to the settlement.

The case is a tale of the sometimes random nature of compliance. Reid Hospital had received requests from its RAC for medical records and the health information management (HIM) department was preparing them for submission, Jim Puffenberger, the CFO of Reid Hospital, tells RMC. Some of the orders for inpatient admissions were missing physician signatures, so the coding supervisor decided to get them after the fact, which is forbidden by Medicare, he says. The coding supervisor dispatched a HIM department secretary to obtain signatures on 14 old orders from the original admitting physicians. Ten signatures were obtained, and the medical records were forwarded to the RAC, according to the settlement.

Although she did as she was told, the secretary was bothered by the directive and mentioned it to the HIM director. As it happened, the HIM director was heading to a meeting with Puffenberger, so she told him about it. “I brought the compliance officer in at that moment and he took charge of everything,” Puffenberger says. The backdating was immediately stopped and the compliance wheels set in motion. But the damage was done, eventually triggering the self-disclosure.

The coding supervisor was called on the carpet. She swore she only planned to add signatures to 14 records, but the hospital felt obliged to conduct a sweeping review for other backdated signatures, Puffenberger says. The HIM department examined all inpatient admissions dating back to 2009 — the same as the RAC look-back period — but there were no other signature manipulations, Puffenberger says.

The next stop was the OIG self-disclosure protocol, which the hospital entered on July 1, 2011. Ultimately, the two parties reached a settlement under the civil monetary penalty law that imposes fines for making or using a false record or statement material to a false or fraudulent claim for payment for items and services furnished by a federal health care program. According to the settlement, OIG contends the hospital “fraudulently modified the medical records for several patients who had long been discharged from inpatient care by inserting into the medical records backdated physician orders for inpatient admission. [The hospital] then presented those records to the RAC for review. The claims were false and fraudulent because [the hospital] knew or should have known that, lacking physician orders for inpatient admission, the claims were not supported by evidence of medical necessity. [The hospital’s] alteration of the records was material to securing payment for the false and fraudulent claims.” OIG spokesman Donald White says Reid Hospital did a very “thorough and comprehensive disclosure to OIG.”

The hospital also terminated employment of the coding supervisor. “She thought she was trying to help the hospital,” Puffenberger says. If the records were sent to the RAC without signatures, the claims would be denied, and the coding supervisor wanted to prevent that. “But obviously you can’t do that.”

It was baffling that the coding supervisor could have believed backdating physician signatures was appropriate considering all the compliance training employees receive, he says. It’s made clear in training that documentation is sacrosanct. “This should have been obvious to this person. But it happens — people think they are doing the right thing but it is the wrong thing,” Puffenberger says. Meanwhile, the hospital has shored up its training. “We need to make sure people are trained properly on the compliance side, and make sure they understand what is right and wrong, especially in coding and conditions of participation,” he says.

At least management found out about the backdated physician signatures right away. “Everyone is encouraged to speak up,” he says. “We have a very strong compliance program.”

Even solid compliance programs aren’t foolproof protection from employees “occasionally making dumb decisions,” says Margaret Hambleton, senior vice president of ministry integrity for St. Joseph Health in Orange, Calif. It might help, however, to scratch below the surface of incentives that may inadvertently encourage noncompliance. Suppose coding supervisors are worried how RAC denials will affect management’s opinion of their competence and even their performance appraisal. “We need to make sure not only that we have education and training in place, but that incentives are appropriately aligned — even when they are not financial incentives, but incentives related to perception,” Hambleton says.

She also says “we have to get out of the mindset that finding errors is bad.” On the contrary, Hambleton contends, “it’s a good thing.” While hospitals would rather find their mistakes before Medicare auditors do, “we shouldn’t punish folks for mistakes that are going to be made” in a super-complex reimbursement system. It’s more productive to identify the root cause of the mistake and devise a solution, which would reduce the temptation to cheat, she says.

Strong Compliance Programs Limit Penalties

The upside to the settlement is that it looks like OIG won’t penalize hospitals unduly if one employee goes off the reservation — as long as they have appropriate policies and procedures, monitoring, training and other compliance functions, says Washington, D.C., attorney Andy Ruskin, with Morgan, Lewis & Bockius. “Clearly OIG respected the fact that the system worked. But if an enforcement authority had caught the error first, perhaps by figuring out the signatures didn’t match, then there would be no good story for the hospital to tell. Instead, you’d have a huge mess.”

© 2012 by Atlantic Information Services, Inc. All Rights Reserved.

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