Half the 132 hospitals targeted in a federal probe of Medicare billing practices knew that the claims they were submitting for the use of non-Food and Drug Administration approved medical devices weren't covered by Medicare, a government investigator told Congress last week.
Also last week, one hospital agreed to pay the government about $1.3 million to settle charges that it falsely billed Medicare for the use of nonreimbursable medical devices.
The hearing testimony, which featured a hooded secret witness, and the settlement were the latest developments in the festering legal dispute over hospital Medicare billing practices. The dispute also has spawned a "whistleblower" lawsuit against an unspecified number of hospitals and a countersuit against HHS over Medicare payment policies for investigational medical devices.
At the hearing, Jack Hartwig, HHS deputy inspector general, told the Senate Governmental Affairs investigations subcommittee that about 30 of the 132 hospitals involved in the billing probe not only improperly billed Medicare but took steps to hide it.
"We believe these hospitals intentionally defrauded the Medicare program," he said.
Prior to November 1995, Medicare and Medicaid did not reimburse for procedures using devices not approved by the Food and Drug Administration. The programs had the option of denying all or part of a hospital admission that involved an investigational device.
Although the policy had been in effect for years, it was rarely enforced. But in 1994, the government subpoenaed records of 132 hospitals. Since then, HCFA has changed its policy and now covers about 70% of all investigational devices.
Hartwig said the HHS probe found that nearly all the hospitals examined had improperly billed Medicare for services involving investigational devices. The amount of false claims ranged from less than 10 cases at one hospital to more than 400 at another, representing millions of dollars in payments.
Last week's hearing was highlighted by testimony from the whistleblower, who charges that hospitals participated in a scheme to defraud the government of as much as $1 billion in Medicare reimbursements.
Details of the whistleblower case were revealed last year when the suit was partially unsealed (Aug. 21, 1995, p. 34). But, the plaintiff's identity has been kept secret, and he testified last week behind a screen and had his voice electronically altered. The mystery witness also wore a hood and large overcoat when leaving the hearing to conceal his identity.
In one alleged scheme, doctors would use an investigational cardiac procedure that would not be covered by Medicare and would perform a second, unneeded angioplasty procedure to ensure payment from Medicare. The whistleblower said the first, non-reimbursable procedure would then be covered-up by hospital personnel who would remove the consent forms for the use of the investigational cardiac device from patient files.
Meanwhile, the first casualty of the probe is Sutter Memorial Hospital in Sacramento, Calif. Under a settlement announced last week by the U.S. attorney's office in Sacramento, the hospital agreed to pay a $1.3 million civil penalty to avoid prosecution under the federal False Claims Act.
According to the government, cardiac patients at the hospital regularly received investigational devices in the course of operations performed as part of clinical trials from 1988 through 1994. Sutter billed Medicare for the operations even though it was told the program didn't cover procedures involving investigational devices.
"We regret that we continued to bill for the devices after we learned about the Medicare manual policy," said Penny Westfall, Sutter assistant general counsel. But, Westfall added that Sutter may have been entitled to payment. Several hospitals involved in the investigation have sued the government, arguing that the revised 1995 Medicare payment policy was illegal because it didn't go through rule-making procedures.
The lawsuit is pending in U.S. District Court in Los Angeles (Jan. 22, p. 21). Sutter isn't one of the plaintiffs.
As part of the settlement, the federal government will dismiss Sutter from the pending whistleblower lawsuit and won't take other civil actions against the hospital. Sutter, in turn, agreed to implement an internal Medicare billing compliance program to avoid similar problems in the future.
