A federal judge in New Jersey has tossed out a lawsuit that argued thousands of hospitals deserve to be compensated by a system that allegedly gamed Medicares outlier program. The decision is sending ripples to Florida, where Tenet Healthcare Corp. faces a nearly identical lawsuit.
St. Barnabas Health Care System, a seven-hospital system based in West Orange, N.J., in June 2006 agreed to pay $265 million to the federal government to settle whistle-blower lawsuits alleging it was submitting inflated charges, or turbocharging, to sweeten its outlier payments from 1995 to 2003 (June 19, 2006, p. 4).
St. Barnabas admitted no wrongdoing in the agreement.
The same month, Dallas-based Tenet agreed to pay $788 million to settle similar allegations with the Justice Department. At that point Tenet had been fending off state and private lawsuits over the practice for more than a year.
A week later St. Barnabas was fighting one, too, filed by 162-bed Longmont (Colo.) United Hospital and 48-bed Maine Coast Memorial Hospital in Ellsworth. Those hospitals and others that sought outlier payments during the years in question, the lawsuit argued, lost money because HHS maintained the funding as a fixed pie.
St. Barnabas, they argued, effectively stole $514 million from its peers and violated the federal Racketeer Influenced and Corrupt Organizations Act.
But U.S. District Judge Dennis Cavanaugh in Newark found that the hospitals alleged harm was too removed and that the government is the party directly injured.
The plaintiffs lawyer, Hal Hirsch of Greenberg Traurig in New York, said he would appeal the decision. If you have a gun and you pull a trigger, the bullet can go through the government and hit the hospitalsits just that simple, Hirsch said. Hes saying they get no recovery? It doesnt work that way.
Floridas attorney general got a better result making the RICO argument on behalf of
13 public hospitals with a lawsuit that ended in February 2006 with a $7 million settlement.
A class-action lawsuit filed by 380-bed Boca Raton (Fla.) Community Hospital survived Tenets motion for summary judgmentthe maneuver that killed the St. Barnabas lawsuitbut was denied class-action status in December 2006. Greenberg Traurig is representing the plaintiffs in that lawsuit as well.
Tenets lawyers immediately filed notice with the Miami court asking the judge to consider the demise of the New Jersey case. No date has been set for a decision on that request.