On the same day that Charter Behavioral Health Systems, Atlanta, agreed to pay $4.7 million to settle a Medicare fraud suit, Magellan Health Services delayed the sale of its 50% stake interest in Charter to Crescent Operating Inc.
Spokespersons from all three parties said the two issues are unrelated.
The Medicare fraud suit, filed by the U.S. Justice Department under the False Claims Act and settled last week, alleged that Charter fraudulently claimed millions of dollars of Medicare reimbursement when doctors at Charter Hospital Orlando (Fla.)-South improperly admitted and extended the psychiatric stays of hundreds of Medicare beneficiaries. The government alleged that the doctors were under pressure from the hospital's corporate headquarters to improve profitability.
Charter disputes the allegations that treatment of the patients was profit driven.
A large portion of the hospital's Medicare beneficiaries were residents of Orlando-area nursing homes or assisted-living facilities and suffered from debilitating organic brain disorders such as Alzheimer's disease and severe dementia, the Justice Department said.
The company said the patient admissions were medically necessary.
Charter had asked an outside geriatric psychiatrist to review the medical records of some patients and found support for the admissions.
Charter spokesman Joel Weiden said, "For a person to be admitted for care, they would need to be suffering from a severe psychiatric illness such as schizophrenia, manic depression or suicidal tendencies. The fact that these patients also have Alzheimer's doesn't reduce the necessity for appropriate treatment."
Though Charter admits no wrongdoing, the company decided to settle the case and "work with the government in a nonconfrontational setting rather than to fight this in the court system," Weiden said.
As part of the settlement, Charter Orlando will be monitored by the federal government for five years and volunteered to not bill the Medicare program for any services for 15 months. Charter would not disclose its potential loss.
Two whistleblowers who had brought the case to the attention of federal lawyers in 1996 will receive $909,899 from the settlement, which was reached in a court-ordered mediation. Under the False Claims Act, whistleblowers can recover 15% to 25% of a settlement.
The day that Charter settled, Atlanta-based Magellan Health Services announced the end of its negotiations to sell its 50% interest in Charter Behavioral Health Systems to Crescent Operating, based in Fort Worth, Texas.
`The companies said the $310 million transaction would hinge on improvement of Charter's profitability and position in the marketplace.
Magellan hopes to help Charter improve financial performance by developing alternative levels of care through outpatient and partial hospitalization in order to supplement its inpatient care, said Erin Somers, a Magellan spokeswoman. Magellan's losses from Charter were $7.2 million for the third quarter ended June 30.