A Kentucky hospital has agreed to pay a $2.3 million fine to settle charges that it submitted false claims to the Medicare and Medicaid programs.
The penalty is the third-largest hospital false-claims settlement since 1984, according to government records compiled by MODERN HEALTHCARE.
The largest-nearly $3.3 million-was paid by Sacred Heart Hospital in Hanford, Calif., in 1991. The former HealthSpan Health Systems in Minneapolis paid a $3 million fine in 1993.
As was Sacred Heart's, the Kentucky settlement is the result of a "whistle-blower" lawsuit filed by someone connected with the hospital.
In his 1992 lawsuit, J. Hilton Brooks, M.D., accused 100-bed Pineville (Ky.) Community Hospital of violating the false-claims act.
Brooks, a physician on Pineville Community's staff, accused the hospital and two of its physicians of falsifying medical records. They did so, according to Brooks, by indicating in medical records that a physician performed a patient history and physical as part of the patient's visit, although neither service actually was provided. They attempted to authenticate the Medicare and Medicaid claims by rubber-stamping the physician's signature on the medical records, he said.
The hospital and physicians had engaged in the illegal billing scheme since at least 1986, Brooks charged.
When Brooks brought the matter to the attention of Pineville Community management, the hospital responded by recommending that his staff privileges not be renewed, according to court records.
On behalf of the federal government, Brooks subsequently sued the hospital and two physicians-Jerry Woolum, M.D., and Talmadge Hays, M.D.-in U.S. District Court in Lexington, Ky. He sought damages of $31 million.
Under the federal whistle-blower statute, individuals who sue on behalf of the federal government in fraud cases are entitled to as much as 25% of any recovery for the government.
However, the parties negotiated the settlement down to less than $3 million. They signed the deal on April 18.
"There was no desire to see the doctors or hospital put out of business," said William Copeland, Brooks' lawyer.
Under the settlement, the hospital and physicians admit to violating Medicare and Medicaid payment rules.
In addition to paying a $2.3 million fine, the hospital also agreed to conduct a training program for managers, employees and physicians on Medicare and Medicaid billing procedures.
The hospital also paid Brooks $300,000 to settle charges that it attempted to retaliate against him by stripping him of his staff privileges, according to Copeland. He has since retained "courtesy" staff privileges, which means he can admit a limited number of patients, Copeland said.
Woolum and Hays each paid $100,000 to settle the false-claims suit.
A spokesman for the hospital referred calls to Pineville Community's attorney, J.P. Cline III.
Cline said there was no intent on the part of the hospital to violate federal billing rules. He said the problem resulted primarily from the actions of the two physicians and "shoddy documentation practices."
Cline also credited the government with pressuring the plaintiff in the case to reduce the damage award in order to keep the hospital open.