Why are the Feds hounding this FP?

Nearly four years after dropping a criminal indictment, the government continues to press its civil complaint.

By Anne L. Finger
Senior Editor

Montana FP Patsy M. Vargo has vivid memories of the Air Force Office of Special Investigations agents who visited her home one evening to subpoena her practice records. "Two guys in trench coats and holsters came down the road without headlights," she recalls. "They were so quiet that our dog didn't even bark. They said later they wanted an element of surprise. It was pretty intimidating—like out of the movies."

For Vargo, that night nearly 5 1/2 years ago signaled the formal start of a battle that a colleague has called "every physician's worst nightmare." After that visit, the government indicted her on criminal charges of overbilling, though it dropped the case when its own expert found no basis for the accusations.

The government didn't drop the matter, however. Now, it's pressing a civil suit against Vargo. Many of the accusations of improper billing involve claims of level 4 and 5 office visits that the government contends lack sufficient documentation.

And the government further alleges that the 70 claims listed in the civil complaint are just the tip of Vargo's upcoding iceberg. According to Leif M. Johnson, the assistant US attorney in charge of her case, a "conservative estimate of overpayments Vargo received as a result of fraudulent and abusive claims" ranges from $125,000 to $175,000. The government will seek to collect an amount in that range, he says, plus sufficient penalties to cover its costs for the investigation. The complaint, however, asks for triple damages as well as civil penalties—an amount that could total more than $37 million. At press time, trial was scheduled to begin July 23.

Vargo's attorneys and supporters depict the prosecution as faulty and mean-spirited. Indeed, a careful reading of the court papers to date suggests that after all this time, the government's case remains highly questionable.

Retribution for breaking the code of silence?

The charges arose from work Vargo did from 1989 to 1996 under contract with the Malmstrom Air Force Base Clinic in Great Falls, MT. She treated CHAMPUS (the Civilian Health and Medical Program of the Uniformed Services) and Medicare patients for a range of services, including ob/gyn, pediatrics, orthopedics, and internal medicine.

At first, Vargo served at the clinic two or three days a week while maintaining a private practice in Great Falls. Eventually, she became so busy at the base that she closed her downtown practice.

"She was invited to work on the base because she's female and does ob/gyn," says otolaryngologist James E. Jarrett, a past president of the Montana Medical Association. "Pretty soon they had to add office space just for Patsy's patients, because the demand for her services was so great."

Vargo contends that her billing practices were never questioned until she testified in 1994 against one of her supervisors, who was accused of sexual harassment by another female clinic employee. In court papers, Vargo asserts that her actions provoked the supervisor and another Malmstrom physician to alert the authorities that her billing practices were suspect.

When she learned in early 1995 that her records were being looked at, Vargo went to Col. Kenneth Rashid, the clinic commander, and asked whether she was under investigation. In a later letter to Vargo's attorney, Rashid said he told her "she was doing a good job and to continue on as usual."

Rashid also said in that letter that the Air Force Quality Assurance program had monitored Vargo's work with random chart reviews, and that any discrepancies would have been brought to the executive committee, which he chaired. He didn't recall ever hearing negative comments about her.

Contrary to Air Force regulations, the government never notified the executive committee of its investigation. Vargo has requested copies of those AFQA reviews, but the government contends the reviews never took place and, therefore, no records exist.

A series of audits, but criminal charges fall flat

The initial audits for the Air Force Office of Special Investigations were performed in 1995 by Lt. Col. Thomas Leach, an FP. According to the government's civil complaint, Leach pulled a sample of Vargo's claims and reported that she had upcoded every one of the 280 claims she submitted from Nov. 14, 1994, to Dec. 13, 1994.

In 1996, Air Force auditor Randy Carpenter pulled 175 of Vargo's claims, which were then reviewed by Howard P. Blount, an FP at Malmstrom. Blount reported that 56 of the 175 claims had been upcoded, and another nine either lacked documentation or billed for an established patient as a new one. Extrapolating from this data, the new audit estimated that Vargo had submitted at least 7,400 inflated or unsupported codes between 1991 and 1995.

Vargo questions the validity of the 1996 audit, based on reservations Carpenter himself raised in his written report. In it, he stated that since he was instructed to pull only samples with probable overbillings, he might have missed some underbillings. He also questioned his own judgment in selecting samples because he wasn't a doctor, and wrote that he wasn't sure he was conducting the audit within government standards. Furthermore, Carpenter raised questions about Blount's expertise. He wrote that when he asked the reviewer whether he was familiar with the CPT codes, Blount said, "I went in the military so I would not have to deal with them."

Despite Carpenter's reservations, the government concluded that Vargo had upcoded the majority of claims she submitted between 1991 and 1995. It also claimed that she'd billed for new patient visits instead of established patient visits, for lab tests she didn't perform, and for patients she didn't see.

It was late February 1996 when the OSI agents made their evening visit to Vargo's home to subpoena her records. She ultimately provided copies of 62,000 records, according to court papers—and resigned from Malmstrom.

Although the government contended that Vargo's billing abuses were varied, the criminal indictment filed against her on June 19, 1997, referred only to one type of upcoding. "They used time as a factor rather than intensity of a visit, so they said there was no way I could have seen so many patients in a day," Vargo says. The indictment charged two counts of fraud, each punishable by up to five years' imprisonment and/or a $250,000 fine.

The government called on Pasadena, CA, gastroenterologist Glenn D. Littenberg as an expert. But Littenberg, who serves on the CPT Editorial Panel of the AMA, saw "nothing even remotely approaching a reasonable basis for an indictment."

Littenberg did find "a common tendency to bill with codes that are higher than the documentation of the services substantiates," but noted that at the time of the visits in question, no guidelines gave Vargo a clear picture of what documentation was expected. He concluded that "the chart notes of Dr. Vargo are in full compliance with the only documentation guidelines that were in effect at the time of the services under review."

Littenberg's evaluation led the government to drop its criminal case against Vargo on Dec. 1, 1997, less than six months after filing it. He has since called the use of the False Claims Act against Vargo an "egregious abuse of due process," because she was never notified of an inappropriate or incorrect billing pattern or given an opportunity to correct it.

The US Department of Defense referred questions about the criminal case against Vargo to Leif M. Johnson, the assistant US attorney in charge of the civil case. He declined to comment on the criminal action because he wasn't involved in the prosecution.

How many 99215s are too many?

All was quiet for two years. Then, in December 1999, the US Attorney's Office filed a civil complaint against Vargo, alleging that she submitted claims that "contained a general pattern of upcoding and [a] variety of billing errors, inaccuracies, and coding abuses." Johnson says that although the criminal charges were dismissed, "the claims are still fraudulent and contain abusive coding. The billing abuses are much greater than originally thought."

Referring to Leach's and Blount's reviews, plus two more by certified coders, the civil complaint alleges that Vargo overcharged the government 7,400 times from 1991 to 1996—although each of the individual claims it cites was filed in either 1994 or 1995.

It notes that 26 percent of Vargo's claims in 1995 were coded for 99215 and 49 percent for 99214, much higher percentages than those of three "similar" providers whose claims the government examined. In fact, of the 990 claims the four doctors combined coded as 99215, a total of 984 belonged to Vargo. But one of those physicians, according to the government's own investigator, should not be used for comparison, because he feels he undercoded his claims.

The government also charged that Vargo billed for lab fees even though the base provided lab services to her clinic at no cost. In addition, continues the complaint, Vargo treated patient phone calls for medication refills as face-to-face visits.

The government elaborated on this charge with a report by a government investigator, completed in February of this year, which concluded that patients would pick up prescriptions from a box in Vargo's office and sign their names. The government contends Vargo used this sign-in sheet to bill for mid- to high-level visits. She says these new charges aren't supported by CHAMPUS payment vouchers.

According to Vargo, the government would have dropped its civil suit if she'd agreed to pay $300,000, and it's continuing to pursue her only to justify its earlier actions in the criminal matter. She believes that reviewers who don't understand why her codes are higher than those used by other primary care doctors aren't aware of the intensity of rural medicine, which deals with a higher proportion of complicated cases.

"We don't treat a lot of colds and flu, because people up here won't drive for an hour or more to come in for those problems," she says. "Instead, they'll give themselves the same antibiotic that they give to their cows."

Greg Russie, a pharmacist who worked with Vargo at Malmstrom from 1989 to 1994, confirmed in a letter to Vargo's lawyer that she saw "many geriatric patients with many co-morbid conditions and diseases, the 'tough' patients that are time-consuming because of complicated and conflicting disease processes." He found Vargo "a dedicated, loyal, and sincere physician committed to quality medical care for every patient she takes care of." The medical profession, Russie wrote, "would be served very favorably if all physicians emulated her dedication."

Similar accolades came from Terry Ryan, who was chief of primary care at Malmstrom when Vargo worked there. Ryan called Vargo "the most competent, empathetic, and hardest working provider in the entire clinic"—a physician he sought out for consults on difficult patients.

Former government expert Littenberg is so convinced of Vargo's innocence that he has joined her defense team. He questions what guidelines the government's reviewers used to make their judgments. "The work that they are alleging was improperly or falsely coded was done before any carrier—or even Medicare—was holding physicians responsible for meeting those guidelines," he says.

"Physicians and their specialty societies received only minimal information until mid-1996. We don't even know which guidelines any particular carrier used, because the carriers regarded them as proprietary and wouldn't share them. So the actual nuances of how to judge a chart weren't even known."

Indeed, Vargo points to a May 1995 report from the HHS Office of Inspector General finding that it was common for practices to code similar office visits differently by one level, and that this didn't constitute fraud.

To Littenberg, Vargo's charts included many areas where there could have been an honest difference of opinion about the coding—and a few mistakes. In his deposition, Littenberg said he thought Vargo and her billing clerk had misunderstood the codes for Pap smears and injections—two major areas the government has focused on. He surmised that they thought the 88150 code was for obtaining the Pap smear, rather than interpreting it, and that the J code was distinct from an injection code.

"There were codes she didn't submit and could have gotten paid for," he added. And, because the CHAMPUS carrier sometimes paid for a visit or injection, but at other times downcoded or didn't pay for similar claims, "I wasn't surprised [Vargo and her biller] remained confused [about] what to do."

In an interview, Littenberg points out that Vargo was a busy doctor—working outside her own private office—who often reported services to her biller one to two weeks after she provided them. Thus, he says, it's not unusual to find a phone conversation occasionally recorded as a visit, or an established patient identified as a new one. "It looked to me like what you see in a fairly typical practice," he says.

But Assistant US Attorney Johnson contends in court papers that the report his investigator completed in February about the prescription pick-up routine shows that "the pattern of abuse that Dr. Littenberg found lacking was, in fact, present throughout." This case is a "fairly garden-variety upcoding issue," he says. "I don't think it's as unreasonable as it's been portrayed. I think there's a significant amount of misinformation about the case."

"Like they were investigating a gangster"

Even if Vargo wins the civil case, she'll feel victimized. Among other things, she's irate at how the government—personified by the men in "trench coats and holsters"—treated her. "Agents came to my home at 8:30 or 9 pm when my husband and I were there with our three kids," she remembers.

Leif Johnson says it's "fairly routine" for law enforcement agents to deliver subpoenas at home, because doing so "doesn't cause problems in the workplace and usually allows the subject to sit down and talk. If they had come to Dr. Vargo's office, that would have been much more disruptive."

Colleagues and patients, however, consider the approach heavy-handed. "It was like they were investigating a drug dealer or a gangster," says Stephen Kubick, one of Vargo's patients. In fact, Vargo became a cause celebre, with colleagues defending her publicly and several patients lobbying their legislators on her behalf.

Vargo believes that the stress she's undergone caused a pulmonary embolus last year and left her with diminished lung capacity. She has said that her legal bills top $300,000.

As a result of her ordeal, Vargo, who continues to practice in Shelby, MT, has begun publicly supporting an amendment to the Kennedy-Kassebaum law that would require local physician peer review before the Department of Justice charges any physician with fraudulent billing. She stated her position in a paper delivered to US Senators and members of Congress late last year.

And she's perplexed why the government is spending money to persuade residents to practice in rural areas—while at the same time driving practicing physicians away by hurling fraud and abuse charges. "Some of the physicians who know how much I've been prosecuted are saying, 'I'm getting out of here as soon as I can. Why risk it?' "

 

Anne Finger. Why are the Feds hounding this FP?. Medical Economics 2001;14:22.