The first monetary settlements in the nationwide investigation of hospitals' Medicare outpatient billing practices reveal that the financial hit for individual hospitals is minor-so far.
In fact, the average settlement from the first 64 agreements that have become public is about $21,000 per hospital, according to an analysis of the agreements by MODERN HEALTHCARE.
MODERN HEALTHCARE obtained copies of the first agreements last week under the federal Freedom of Information Act. All the agreements involve hospitals in Pennsylvania, where the investigation began, and all the deals were struck from August through October of last year.
Of the 64 agreements, York (Pa.) Hospital paid the highest civil monetary penalty-$154,775. Sharon (Pa.) Regional Health System paid the smallest-just $1,223 (See chart).
In total, the 64 hospitals paid the federal government about $1.3 million in civil monetary penalties. About 116 other Pennsylvania hospitals have reached similar settlements, but the agreements have yet to become public.
Like other hospitals targeted in the investigation, now in its 16th month, the government accused the Pennsylvania hospitals of improperly billing Medicare for outpatient diagnostic tests performed shortly before patients were admitted to the hospital.
Under Medicare billing rules, tests taken within 72 hours of admission are considered part of the inpatient stay and are reimbursed as part of the DRG payment. The government contends many hospitals have billed and continue to bill separately for the tests, which results in double payments for the same procedures.
A series of four audits by HHS' inspector general's office found that as many as 4,600 hospitals nationwide were overpaid as much as $115.1 million from 1983 through 1991 for such tests. The preliminary results of a fifth audit indicate another $26.5 million in overpayments for 1992 and 1993.
In December 1994, the U.S. Justice Department began notifying hospitals that they had violated the federal False Claims Act and soliciting monetary settlements lest the government take them to court (Jan. 2, 1995, p. 3). The U.S. attorney's office in Harrisburg, Pa., is coordinating the probe.
After a model settlement was drafted based on its work in Pennsylvania, the government began rolling out the investigation and proposed settlements in a number of other states, including Florida, Illinois, Indiana, Louisiana, Mississippi and Missouri.
In each of the 64 settlements made public, the amounts covered alleged false claims submitted by the hospitals from October 1987 through December 1991. Each hospital also agreed to pay the government for all "erroneous" claims submitted and paid on or after Jan. 1, 1992. Those amounts, however, weren't identified in the settlements.
Although none of the settling hospitals admitted to any violation of federal law, each agreed to implement an internal Medicare billing compliance program to avoid similar problems in the future.