A Delaware hospital last week became the first hospital in the country to settle allegations that it improperly billed Medicare for patients whom it transferred to other hospitals.
The $1.3 million settlement is part of a national project HHS' inspector general's office launched in 1997 that looks at how hospitals bill Medicare for patients they transfer to other facilities rather than send home.
The project is a second effort by the feds to crack down on Medicare overpayments to hospitals, which come about because of how hospitals report the discharge or transfer of patients. Another effort focuses on hospitals that discharge patients early to post-acute-care settings (See story, this page).
Under billing rules that have been in effect since Medicare's prospective payment system began in 1983, hospitals that admit but then transfer a patient to another hospital are entitled to only a pro-rated share of the DRG payment for that case. Only hospitals that discharge patients home, effectively ending their inpatient stay, are entitled to the full DRG payment.
HHS is concerned that hospitals transferring patients are billing Medicare for the full DRG amounts, claiming they discharged the patient home.
That's what HHS' inspector general alleged happened at 212-bed Beebe Medical Center, an independent not-for-profit hospital in Lewes, Del., from Jan. 1, 1992, through June 30, 1999.
The Beebe investigation began in early 1999 after a routine audit by the inspector general.
Beebe President and Chief Executive Officer Jeffrey Fried said the 85-year-old hospital admitted to billing errors caused by inaccurate coding information.
"We've acknowledged from the beginning that these were mistakes that we made," Fried said. "They were not, however, intentional."
Fried said the government's initial investigation uncovered 251 improperly billed patient transfers through 1997, and the hospital voluntarily reported another 64 cases that occurred after that.
Fried said the $1.3 million settlement essentially is the total amount Medicare overpaid the hospital plus interest.
In fiscal 1999, Beebe earned $3.5 million on revenue of $160.4 million.
Assistant U.S. Attorney for Delaware Luis Matos said the case and what he described as a reasonable settlement amount show that "we're committed to pursuing these cases in a fair and even-handed manner."
In addition to the civil monetary penalty, Matos said, Beebe officials signed a three-year corporate integrity agreement that includes a billing training program, code of conduct, self-audits and annual compliance reports.
The settlement is the first of what could be many patient-transfer cases to come, said Gabriel Imperato, a healthcare lawyer specializing in fraud cases.
Imperato, who's with Broad & Cassell in Fort Lauderdale, Fla., said there's no way of knowing exactly how many hospitals have been targeted in the patient-transfer investigation. But based on the government's stated interest in these cases, he said, he believes there could be more than 100 hospitals under this investigation's microscope.
HHS inspector general spokeswoman Alwyn Cassil would not disclose how many more patient-transfer cases are in the pipeline.
"We're still in the early stages of this national project," Cassil said. "But we're pleased to have this matter resolved and appreciate the cooperation the medical center offered throughout the review."
The hospital industry has had plenty of warning that the feds are interested in patient transfers.
For most of the 1990s, HHS' inspector general's office has warned healthcare providers through a series of audits and speeches about improperly billing Medicare for patient transfers. But the conduct has continued, according to the agency.
In a November 1996 report, the inspector general estimated that improper patient transfers had cost Medicare $352.3 million since 1986.