Ending a two-year civil investigation by state and federal authorities, Honolulu-based Kapiolani Health agreed last week to pay $3.4 million to settle charges that it overbilled Medicare and Medicaid for services provided by its now-defunct home-care divisions.
Under the settlement, the two-hospital system admitted no wrongdoing.
Dewey Kim, Hawaii's deputy attorney general, said the state will continue a separate investigation into possible criminal wrongdoing in connection with the home-care overbilling.
Roger Drue, Kapiolani's president and chief executive officer, acknowledged in a written statement that two subsidiaries-Kapiolani Home Health Services and Kapiolani Extended Care-overbilled Medicare and Medicaid by more than $700,000 in the mid-1990s because of "our failure to effectively oversee" their activities.
The billing problems "do not represent who we are, what we stand for or how we normally do business," he said.
The state and federal investigation was launched in July 1997, after a former Kapiolani employee filed a whistleblower lawsuit in federal court against the home-care subsidiaries.
Of the settlement amount, $1.9 million will go to the federal government; $700,000 will go to the state of Hawaii; $630,000 will go to the whistleblower; and $180,000 will go to the whistleblower's lawyers.
In a separate development, Kapiolani confirmed that Harvey Smith, president and CEO of the system's 51,000-enrollee HealthHawaii HMO, and Ian Killips, the system's senior vice president with responsibility for health plan operations, resigned effective Aug. 20.
Pat Oda, a company spokeswoman, said they left to "pursue other interests" and that their resignations were unrelated to the billing issue.
The resignations come less than a month after Honolulu-based Queen's Health Systems pulled out of talks to buy HealthHawaii and merge it with Queen's Health's own 170,000-enrollee managed-care company (Aug. 16, p. 8).