A whistleblower lawsuit, partially unsealed last week, charges that hospitals deliberately miscoded procedures and manipulated patient records to obtain up to $1 billion in federal reimbursement for the use of investigational devices.
The suit lies behind the broad federal probe of hospital billing for investigational devices. Last year, subpoenas to 132 research centers shocked the industry and prompted several hospitals to discontinue or limit clinical device trials (Feb. 20, p. 34).
Under longstanding policy, Medicare and Medicaid classify products that don't have Food and Drug Administration marketing approval as "investigational" and, therefore, not reimbursable. Both programs, however, pay hospitals a fixed rate based on diagnosis, instead of the products used. Because of that, many hospitals say they believed reimbursement was due no matter what products were used.
In contrast, the allegations of the whistleblower suit imply a conspiracy to deceive the government. The suit names several prominent research institutions, including Cedars-Sinai Medical Center in Los Angeles, Mount Sinai Medical Center in New York and Johns Hopkins Hospital in Baltimore.
Len Homer, a lawyer for the hospitals, called the charges "hogwash."
The centers are part of a coalition of hospitals that has asked the U.S. District Court in Los Angeles to declare the government policy illegal (May 15, p. 26). The court is scheduled to hear arguments on Oct. 30.
Homer said that the hospitals' lawsuit might have prompted the whistleblower to unseal some of the records in that case, hoping to influence the California hearing. Donald Warren, a San Diego lawyer for the whistleblower, didn't return calls.
Part of the suit, including the identity of the whistleblower, remains sealed. That probably means the Justice Department still is reviewing results of its probe and hasn't decided whether to join the whistleblower suit, Homer said.