UK says it repaid feds $5 million because Hazard doctors didn’t keep good records

Practitioners in a Hazard cardiology practice acquired by UK HealthCare wouldn’t properly document the medical necessity of the surgeries they performed and were unwilling to conform to the University of Kentucky’s standards, according to a document released Thursday by UK.

Those two factors led UK to repay $5 million to the federal Medicare and Medicaid programs, although an investigation by UK “found no evidence of wrongful intent, deliberate ignorance, or reckless disregard of the law,” according to a PowerPoint presentation given last year to the UK Board of Trustees.

Washington, D.C., lawyer David Douglass briefed the trustees about the issues at a dinner on May 2, 2016, although trustees hadn’t been consulted about UK’s purchase of the Appalachian Heart Center when it was bought in 2013.

UK released the document after Fayette Circuit Judge Pamela Goodwine ordered UK last week to provide it and other documents that the Herald-Leader had requested last year under the Kentucky Open Records Act. Goodwine upheld most of an opinion by Attorney General Andy Beshear’s office saying that UK had violated Kentucky’s open meetings and open records laws by not keeping minutes of the meeting and by refusing to release the PowerPoint presentation and a related audit.

Goodwine agreed with UK that it didn’t have to produce detailed billing records because it had already released the total paid to Douglass, about $1 million.

UK might still appeal Goodwine’s order to turn over UK audits that identified the billing problems.

According to the presentation by Douglass, UK’s acquisition of the practice furthered its goal of improving health care in Eastern Kentucky. However, UK auditors found that there were potential problems in the way the firm billed Medicaid and Medicare for patient care. Douglass’s presentation pointed out highly publicized cases of such problems at other hospitals, including King’s Daughters Medical Center in Ashland, which paid the government $41 million to settle allegations that it fraudulently billed federally funded health care programs for hundreds of unnecessary heart procedures.

The Kentucky Medical Services Foundation, UK HealthCare’s billing arm, conducted an audit, and legal experts conducted two independent reviews. UK also conducted a coding review, or looked at how the practice described and billed certain procedures.

In his presentation, Douglass concluded that “all involved in the acquisition and on-boarding of AHC acted in good faith.”

“The AHC physicians are hard-working, skilled medical professionals dedicated to their patients and community, and committed to providing high-quality care,” the presentation says. But, it says, “AHC Physicians proved unwilling to conform their practices to UK standards.”

Several calls to the Appalachian Heart Center seeking comment for this story were not returned.

Douglass concluded that there was no evidence of “reckless disregard” of the law, but that errors in the UK acquisition process and the firm’s poor documentation resulted in the need to pay back the federal government.

The Appalachian Heart Center notified UK that it would separate from UK in 2015, and that became final in April 2016.

Douglass also said lessons were learned, including ensuring that appropriate clinical, management, legal and compliance due diligence is conducted, and understanding the partner’s clinical, management and compliance infrastructure and culture. The acquisition was the first in UK HealthCare’s history, and to date, it has not been repeated, although UK HealthCare has numerous partnerships statewide.

Under a slide called “Risks and Risk Management,” the PowerPoint documents list “whistleblower risk,” “government investigation” and “media inquiry.”

UK spokesman Jay Blanton said the presentation reinforced what UK has previously said about the clinic.

“Errors were made,” Blanton said. “That unfortunately happens in what everyone acknowledges is a highly regulated and complex industry. We acknowledged that fact and took responsibility for it as we should. We made the appropriate repayments and took corrective actions.”

UK sued the Herald-Leader last fall to appeal the attorney general’s decision that UK should release its documents about the Hazard clinic to the newspaper. UK lawyers argued that they could keep them secret because of attorney-client privilege and because they were preliminary. Goodwine, though, said the documents were neither “communications within the meaning of attorney-client privilege” nor “confidential communications” made for the purposes of taking legal action, both of which are allowable exemptions under the open records law.

In addition, Goodwine upheld Beshear’s ruling that UK violated the open meeting law by allowing Douglass’s presentation at a dinner meeting at which minutes were not created. UK officials didn’t close that meeting under state law, but they argued that Douglass’s presentation should be considered confidential.

“Either the dinner was a regular called open meeting, such that the board could have no legitimate expectation of confidentiality, or it was not,” Goodwine wrote.

This story was originally published July 7, 2017 at 10:56 AM with the headline "UK says it repaid feds $5 million because Hazard doctors didn’t keep good records."