June 2004 -


UW Pays Record $35 Million to Settle Government Billing Fraud Claims

In the largest settlement made by any academic medical center in the nation, the University of Washington will pay $35 million to settle a lawsuit charging massive billing fraud in Medicare, Medicaid and other government health plans at three hospitals and local physicians clinics, the UW and U.S. Dept. of Justice announced April 30.

The lawsuit resulted from charges made by a former employee of the UW Physicians billing office, Michael Erickson, who will receive $7.25 million of the settlement money under federal “whistleblower” regulations.

Erickson’s complaint accused the UW of widespread fraud such as “upcoding,” where a physician charged Medicare for a more complicated medical procedure than actually took place. Physicians also billed Medicare for procedures as if they were present, when medical residents actually performed the procedures, the complaint contended.

“The vast majority were unintentional mistakes,” said School of Medicine Dean Paul Ramsey at an April 30 press conference. “Medicare billing regulations are very complex. Our physicians were working very hard to comply with complex billing regulations.”

No state appropriations or tuition will be used to pay the settlement. Ramsey said the money will come out of a $180 million reserve fund that UW Medicine has built over the years for emergencies. “We will need to rebuild the funds,” he added, but “the settlement will not affect the (patient) fee structure.”

According to UW attorneys, 33 other academic medical centers in the U.S. have settled with the federal government over Medicare/Medicaid billing errors. Until the UW settlement, the record had been a $30 million payout by the University of Pennsylvania in 1995.

When asked if Erickson deserves his share of the multi-million-dollar settlement, U.S. Attorney John McKay Jr., ’78, said, “Yes, he deserves every penny of it.” He said Erickson played a “pivotal role” in both the civil and criminal portions of the case. Criminal charges were filed against former UW Neurosurgery Professor H. Richard Winn and UW Nephrology Professor William Couser earlier in the investigation. Both pleaded guilty to at least one charge.

McKay said his investigation found that “many people within the plans were aware of billing problems that involved many departments associated with the medical school.” The U.S. attorney said he was “especially troubled by evidence that Erickson was directed to destroy audit reports and rewrite them to cover over problems the original audit reports addressed.”

However, the UW contested all of the whistleblower’s charges. “There was no document destruction,” said Special Assistant Attorney General Dan Dubinsky.

“The UW denied the allegations made in the complaint—every single one of them. They are not accurate. They have never been vetted in a court of law,” added attorney David Robbins. When asked why the UW did not take the matter to court, he said there were hundreds of thousands of patients records going back nine years that would have to be reviewed. “You have to weigh the risks and benefits of litigating the matter.”

McKay, whose late father was on the UW School of Medicine faculty, said it was a difficult case. He noted that UW Medical Center and Harborview provide the “bulk of low income health care in the region” and that the UW medical system is the “core medical system in the region.

“The quality of care provided by the University of Washington’s medical system has never been in question. We did not want to damage this system,” he said.

Since the lawsuit was filed, he added, the UW “has radically restructured their compliance office.” He later said, “The government is very pleased with the efforts the UW is taking to take care of these errors.”

As part of the settlement terms, the UW will have independent auditors monitoring its billing system. It is now spending more than $4 million a year on compliance, Ramsey explained.