Healthcare Business News

Rare-disease code inflated payments, feds say

By Joe Carlson
Posted: October 21, 2011 - 2:30 pm ET

A rehabilitation hospital owned by the University of Maryland Medical System has been sued by the Justice Department for allegedly inflating its reimbursements by $1.6 million for treating a rare form of protein malnutrition more commonly found in famine-wracked African nations.

In a False Claims Act lawsuit filed Oct. 17 against Kernan Hospital (PDF) in Baltimore, federal investigators say the providers' administrators, doctors and information technology officials conspired to artificially drive up the number of reported cases of Kwashiokor so that the hospital's case mix would appear more complex and expensive to treat than it actually was.

Specifically, investigators said the hospital's Information Management Department implemented a system that forcefully and secretly suggested doctors to include the phrase “protein malnutrition” in certain patient files. The hospital's software then flagged any mention of “protein malnutrition” in patient records so that the billing department's coders would classify the cases as Kwashiokor.

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Hospital officials deny the allegations of fraud. Mary Lynn Carver, senior vice president for communications at University of Maryland Medical Center, said in an e-mail that the hospital is well-known for treating traumatic brain injury patients who often need feeding tubes for protein for prolonged periods of time.

As many as 30% of the hospital's patients arrive with feeding tubes following long stays in acute-care hospitals, she said. She noted that an April 2011 brief from the Institute of Medicine encouraged hospitals to standardize nutrition and feeding for traumatic brain injury patients to improve their long-term care.

Unlike most states, Maryland sets its own Medicare rates. In 2005, the state began allowing providers to include secondary diagnoses in patient records to gauge patient complexity, allowing hospitals with more complex patient-case mixes to be paid more for their care.

Investigators say the number of cases of Kwashiokor diagnosed by Kernan Hospital spiked, from zero in 2004 to 287 cases in 2007. All told, investigators found that 23% of Kernan's Kwashiokor diagnoses were unsupported by evidence between 2005 and 2009.

Carver said an independent review of the same information by the hospital came to a “substantially different conclusion,” and hospital officials look forward to working with the Maryland U.S. attorney's office to resolve the litigation.

While most False Claims Act cases against hospitals start with complaints from whistleblowers, the Kernan case was filed directly by the Justice Department on behalf of the HHS and the Defense Department, after Maryland's Health Services Cost Review Commission noticed the spike in Kwashiokor diagnoses and investigated, the lawsuit says.

The lawsuit accuses the hospital of five counts of fraud under the False Claims Act, a law that allows for triple damages in cases where liability is established, plus fines of $11,000 per violation.

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