Officials at Continental Medical Systems said the U.S. Justice Department made surprise visits last week to more than half of the company's 38 rehabilitation hospitals and questioned several CMS employees about the company's Medicare billing practices.
Dennis Lehman, CMS' chief financial officer, said the company doesn't know the nature of the investigation, nor had its representatives been able to contact federal authorities. However, he did confirm that federal officials interviewed several CMS employees last week and asked them background questions about the company.
"Some of the questions (federal investigators) asked were who the key employees of the hospitals were, and others were background questions regarding (the hospitals') Medicare billing practices," Mr. Lehman said.
The investigators did not serve the company with any subpoenas, CMS officials said.
Justice Department officials couldn't be reached for comment.
The Mechanicsburg, Pa.-based hospital chain released news of the investigation Oct. 27. The company said it made the announcement to alert investors about the visit prior to possible news stories or rumors.
However, this isn't the first time CMS has had a run-in with federal authorities over Medicare billing practices. In May, a CMS-owned hospital-Braintree (Mass.) Hospital-paid the federal government a $1.6 million fine to settle charges that it submitted false claims to the Medicare program in 1991 (July 18, p. 4). That fine was the third-largest civil monetary penalty paid by a hospital accused of false billing since 1984.
Over the past year, the federal government has cracked down on healthcare companies it accused of engaging in illegal Medicare billing practices. The most famous was National Medical Enterprises, which agreed to pay federal officials $379 million to settle charges that it took part in criminal activities in an effort to get more patients and money (July 4, p. 2).
The NME investigation began in a similar manner in August 1993, as hundreds of federal agents swept into NME headquarters and a number of regional offices, seizing patient records and other documents.