In what could be a portentous case, a Wichita, Kan., hospital has agreed to pay nearly $115,000 to settle allegations that it padded its Medicare cost reports with unallowable claims.
The settlement is significant because the federal government is investigating allegations that two of the nation's largest for-profit hospital chains, Columbia/HCA Healthcare Corp. and Quorum Health Group, padded their Medicare cost reports over a 14-year period (See related story, p. 38).
What many consider to be Columbia's flagship hospital, 510-bed Wesley Medical Center, is in Wichita.
Federal investigators alleged that Riverside Health System, which includes 103-bed Riverside Hospital, claimed physicians' bad debts as legitimate costs in its annual Medicare cost reports for 1992, 1993 and 1994.
The settlement with Riverside, a small not-for-profit hospital, is believed to be the first of its kind. It offers some indication of how pervasive the padding of cost reports could be in the healthcare industry-and how anxious the government is to find it.
"Getting to Columbia through their cost reports has made that a hot area for the government," said Neil Caesar, an attorney with the Health Law Center in Greenville, S.C. "Cost report abuses have been on the (HHS') inspector general's work plan for the past couple of years. Pursuing violations based on cost report inaccuracies will continue and increase over the years."
The government's hot pursuit of cost report shenanigans is a 180-degree turn from its position on the matter just a few years ago.
In 1992, HHS' inspector general' office audited 21 hospitals, including some prestigious not-for-profits, that were accused of trying to sneak unallowable claims into their cost reports (Sept. 1, 1997, p. 2). The audits identified $50.7 million in unallowable costs submitted by the hospitals in 1990 and 1991. None paid any civil or criminal penalties or fines.
In the Riverside case, federal prosecutors alleged that the hospital "acted in reckless disregard of the rules" by ignoring the advice of its fiscal intermediary, which told the hospital that physicians' bad debts were not reimbursable.
Instead, Riverside continued to claim the bad debts as allowable costs on its cost reports for three years, the government alleged.
In a prepared statement, U.S. Attorney Jackie Williams said Riverside agreed to pay $229,000 to settle the charges. The settlement, recently obtained by MODERN HEALTHCARE through the Freedom of Information Act, said the hospital paid $115,000. Riverside spokeswoman Nadine Fountain declined to comment on the reason for the difference.
Riverside chose to settle the allegations out of court to avoid the uncertainty and expense of trying the case, according to the settlement.
The hospital did not admit any wrongdoing.
In addition to paying the $115,000 civil fines, Riverside entered a corporate integrity agreement, requiring it to:
Submit annual compliance reports to HHS for the next four years.
Appoint or hire a corporate officer to chair a compliance committee.
Set up a confidential disclosure program to collect anonymous tips from employees.
Post the inspector general's toll-free fraud hotline in conspicuous places throughout the hospital.
In a written statement, Riverside said it had already implemented many of these policies when it established its compliance program last year.