Last week's $73 million whistle-blower settlement with New York City's Beth Israel Medical Center was one of the largest single hospital cost-reporting fraud cases. But it won't affect the hospital's current renovation and development plans, said a spokesman for the 881-bed hospital.
The settlement came amid what one expert believes is an increase in hospital billing fraud.
On Nov. 30, Beth Israel agreed to pay $72.9 million to resolve allegations from a former hospital executive that it falsified Medicare cost reports from 1992 to 2001. Michael Garcia, U.S. attorney in New York City, alleged that Beth Israel falsely and intentionally included unallowable costs, primarily related to physician practices, on its Medicare cost reports from 1992 to 2001. Garcia alleged in a 22-page complaint that Beth Israel defrauded Medicare by causing it to overpay for such nonreimbursable costs as salaries, supplies, equipment and administrative overhead provided to the private outpatient practices of hospital faculty physicians.
"No provider--big or small--can be allowed to manipulate cost reports for the purpose of fraudulently inflating its reimbursement under the Medicare program," Garcia said in a news release.
Beth Israel, part of five-hospital Continuum Health Partners, agreed to the civil settlement without admitting wrongdoing. The hospital will pay $36.4 million in repayments for unallowable costs alleged by the HHS' inspector general; $18.3 million for additional overpayments the hospital self-reported to HHS; and an $18.2 million penalty. Beth Israel will pay $10 million now and the remainder over five years. If it takes the entire five years, the hospital will pay close to $90 million, including interest.
In a news release, the hospital said the settlement will not affect patient care or current renovation and redevelopment plans. "We are grateful that this review is behind us, and we look forward with great enthusiasm to continuing our mission to assist the tens of thousands of New Yorkers who turn to us for care," the hospital said. Spokesman Jim Mandler said in an interview that the entire amount was reserved on the hospital's balance sheet by the end of 2004.
The case stemmed from a 2001 whistle-blower lawsuit filed in U.S. District Court in New York City by former Beth Israel vice president of financial services, Najmuddin Pervez. Pervez's New York attorney, Philip Michael, of the firm Troutman Sanders, said his client will receive 20% of the recovery amount, around $15 million. In an unrelated 2001 case, Beth Israel had paid $1.2 million to resolve other civil fraud allegations.
Billing fraud is on the upswing, according to New York physician Bert Forman, president of Healthcare Forensic Auditors. He said his firm, which represents payers, is finding increased billing fraud. Forman, who did not work on the Beth Israel case, attributes much of the alleged fraudulent billing to unscrupulous consulting firms and cash-strapped hospitals desperately accepting their advice.
"There is a cottage industry of consultants teaching hospitals how to overbill insurers," said Forman. "While the smarter consultants steer their clients clear of billing Medicare and Medicaid, it's a different world under private insurers. And that usually escapes the notice of state and federal prosecutors. Private payers have little interest in developing systems to uncover fraud. It makes them look incompetent to their shareholders. That's why a lot of this is falling through the gaps."