Hospitals in Florida, Illinois and Indiana are the next to be targeted in the U.S. Justice Department's ongoing investigation of hospital outpatient Medicare billing practices, MODERN HEALTHCARE has learned.
Hospitals in those states may begin receiving settlement letters from the Justice Department as soon as this fall.
The head of the hospital negotiating team in the case and a Justice Department official confirmed the three-state rollout plan last week. Eventually, targeted hospitals in every state will be contacted by the Justice Department.
"There's no particular significance to the choice of those three states," said Mary Catherine Frye, chief of the civil division of the U.S. attorney's office in Harrisburg, Pa. "The decision was based on the completeness of the data."
The Harrisburg office is coordinating the nationwide billing probe, which came to light last December when nearly 200 hospitals in Pennsylvania began receiving letters from the government demanding payment (Jan. 2, p. 3). The letters said the hospitals could repay the amount of the alleged false claims plus a penalty or face prosecution under the federal False Claims Act.
The focus of the investigation is how hospitals bill Medicare for diagnostic tests taken shortly before a patient is admitted to the hospital. Under Medicare billing rules, tests taken within 72 hours of admission are considered to be part of the inpatient stay and are reimbursed as part of the DRG payment. The government says many hospitals have billed and continue to bill separately for the tests, which results in double payments for the same procedures.
HHS' inspector general's office conducted four separate audits of hospital bills between 1983 and 1991 and uncovered as much as $40 million in overpayments to 4,600 hospitals, according to Justice Department officials.
But hospitals' financial exposure under the False Claims Act far exceeds the amount of any double payments. Violations of the act carry civil penalties of up to three times the total amount of the false claims and a fine of between $5,000 and $10,000 per claim.
After the Pennsylvania letters went out, the hospital industry formed a team of lawyers to meet with the Justice Department and attempt to lessen the probe's burden on hospitals. Attorneys representing the American Hospital Association, the Hospital Association of Pennsylvania and the Hospital Council of Western Pennsylvania were part of the negotiating group.
After six months of discussions, the two sides hammered out a settlement that would be offered to hospitals in targeted states. Under a draft settlement, obtained late last month by MODERN HEALTHCARE, hospitals would be immunized from liability under the False Claims Act in exchange for reimbursing the government the amount of the alleged false claims, plus a penalty based on the volume of alleged false claims (June 26, p. 3).
The final details of the settlement agreement are being ironed out, said Thomas Boyle, who chairs the hospital industry negotiating team. He's an attorney with Buchanan Ingersoll in Pittsburgh.
Boyle said the settlement likely would be offered to the Pennsylvania hospitals by early August.
Boyle said it's unlikely that the hospital associations involved will encourage their members to accept the government's offer. He said they probably will acknowledge it as the "best deal available" and let hospitals make their own decisions.
Demand letters and settlement offers likely will be sent to hospitals in Florida, Illinois and Indiana "within a couple months," Frye said.
Her office is clearing the matter with U.S. attorney's offices in those states to avoid any conflicting legal action involving the same hospitals.
Frye also said other states may be added to the investigation based on the availability of data from hospitals in those states.
Hospitals that improperly billed Medicare will be offered a deal.