Two university hospitals on the West Coast last week settled charges that they improperly billed Medicare and other government insurance programs for procedures in which they used investigational medical devices that at the time were not approved by the U.S. Food and Drug Administration.
The hospitals are the second and third to settle such charges, which stem from a 1994 "whistleblower" fraud lawsuit filed by former medical device salesman Kevin Cosens in U.S. District Court in Seattle against at least 26 and as many as 132 academic and research hospitals.
That lawsuit, which is pending, prompted a wide-ranging investigation by HHS' inspector general's office into whether hospitals were billing the government for the use of investigational medical devices that had been approved by the FDA only for experimental use.
As part of the investigation, the inspector general in 1994 subpoenaed the billing records of 132 hospitals suspected of billing government health programs for investigational cardiac surgery devices, such as new pacemakers and defibrillators. Most of the devices in question have since been approved.
The hospitals settling last week were part of that group of 132. They are 413-bed University of California at San Diego Medical Center, which paid a $4.7 million civil monetary penalty; and 398-bed University of Washington Medical Center in Seattle, which paid a $3.6 million fine. Both allegedly submitted false claims for the devices between 1989 and 1995.
Neither hospital admitted to wrongdoing under the settlements, the amounts of which represented only the payments made to the hospitals by the government.
Eric Larson, M.D., medical director for the University of Washington Medical Center, characterized the case as a "costly billing dispute."
Charles Mittman, M.D., dean of clinical affairs and chief compliance officer for the University of California San Diego School of Medicine, said: "It is our view that the charges submitted were for medically necessary and appropriate services, which were completely justified and were allowed under Medicare regulations."
The first hospital to settle similar charges stemming from the medical device investigation was 497-bed Sutter Memorial Hospital in Sacramento, Calif., which paid $1.3 million in February 1996.
The original subpoenas provoked a maelstrom of outrage from academic and research medical centers when they were first issued.