Standing on principle can be costly, as a suburban Philadelphia hospital discovered when it agreed to pay $4.2 million to settle laboratory billing fraud charges it could have settled several years ago for $1 million.
Two years after the U.S. attorney in Philadelphia charged 454-bed Abington (Pa.) Memorial Hospital with systematically defrauding Medicare by "remaining deliberately ignorant" of improperly billing 70,000 claims for clinical laboratory services, Abington settled last week.
The hospital denied the allegations and settled to avoid "a costly, protracted court battle," Abington President and Chief Executive Officer Richard Jones Jr. said in a news release.
Jones said the "mistakes made were the result of human error in a complex billing system that includes tens of thousands of billing codes, with complicated and ambiguous guidelines."
In April 2003, Jones vowed that the hospital would defend itself vigorously. He then denied any intent to defraud but conceded that "inadvertent payments were made." The hospital offered to refund the payments to Medicare, he said then.
U.S. Attorney Patrick Meehan said the state of Pennsylvania told the hospital in 1994 its Medicaid billing was inaccurate, but Abington allegedly continued to collect up to $1 million in improper billings. From 1991 through 1999 Abington allegedly "unbundled," or billed Medicare for individual lab tests at a higher reimbursement rate when the tests had actually been administered as a group; double-billed; or billed for tests that were not medically necessary at its outpatient clinical lab, said the complaint filed in U.S. District Court in Philadelphia.
In 2000, Meehan's office told Abington it was under investigation, after which the hospital allegedly "failed to maintain and/or intentionally destroyed and/or disposed of physician orders, billing and other records," according to the complaint.
At the time the U.S. attorney offered to settle the case for $1 million, less than a quarter of the amount the hospital ultimately agreed to pay and considerably less than the possible $70 million in penalties it faced under the whistle-blower law, according to government sources who spoke on condition of anonymity.
In addition to the settlement amount, Abington signed a five-year corporate integrity agreement requiring it to hire a new outside compliance staff. The compliance staff will conduct annual audits to make sure the hospital remains in compliance, Meehan said in a news release.
Stuart Gerson, a former U.S. Justice Department official now with the law firm Epstein, Becker & Green, said if the hospital was offered the $1 million settlement years ago and didn't take it, "it miscalculated." Gerson suggested the hospital may have settled for the higher amount to avoid the possibility of exclusion from Medicare and Medicaid.
Abington attorney James Becker of the law firm Saul Ewing denied the government ever made a "concrete settlement offer of $1 million." Abington spokeswoman Beth Ann Neill said the hospital paid the higher figure because it faced much larger potential penalties under the federal False Claims Act.