Federal investigators have been contacting hospitals across the country in a False Claims Act investigation that so far has netted more than $10 million from seven settlements. That’s likely just the beginning.
Six more hospitals settle False Claims allegations
Last week, the U.S. Justice Department announced settlements reached with six hospitals resolving allegations that they unnecessarily admitted patients overnight for a procedure called kyphoplasty, in which bone filler is injected through a balloon inflated in small spine fractures often caused by osteoporosis. (See box for a list of hospitals, settlement sums.) It was the second round of such agreements. In May, HealthEast Care System, St. Paul, Minn., agreed to pay $2.3 million to resolve allegations involving kyphoplasties at three of its four hospitals.
“Every hospital should realize it could be under the investigative spotlight,” said Ronald Clark, who was involved in negotiating HealthEast’s agreement before leaving his law firm to become an independent False Claims Act defense consultant and expert witness. “It’s a perfect thing for DOJ mass production. You show up on someone’s doorstep and say: ‘These are what the records show you did. We think it’s fraud.’ It’s an effective way to generate very nice stats with minimal investment in energy and time.”
The government investigators are starting with a presumption that kyphoplasties should have been outpatient surgery and that inpatient claims were fraudulent unless a hospital can document that an admission was medically necessary in a particular case.
None of the hospitals admits liability in the agreements, and none was required to enter a corporate integrity agreement with HHS’ inspector general’s office, which the government often demands to prevent future fraud. “We have taken the necessary steps and implemented new policies to ensure compliance and to prevent similar incidents from occurring,” said a written statement from Robert Brody, president and CEO of St. Francis Hospital & Health Centers.
The government’s interest was piqued by a whistle-blower lawsuit filed against Kyphon, a devicemaker now owned by Medtronic that makes kits used in the procedure. Two former Kyphon employees alleged the company engaged in a scheme to market kyphoplasty as an inpatient procedure to hospitals wary that outpatient reimbursement from Medicare carriers in their regions wouldn’t cover the cost of the kit, about $3,400 according to an amended complaint filed in 2006. The overnight stay would yield payment ranging from $6,000 to $10,000, depending on the location of the hospital and the particular coding on the claim.
Charles Bates, who had been a regional sales manager, and Craig Patrick, a former reimbursement manager, said the company undertook an aggressive campaign to persuade hospitals and physicians to routinely keep patients overnight for kyphoplasty, knowing it was unnecessary in most cases.
Medtronic reached a $75 million settlement resolving the case in 2008. Meanwhile, Bates and Patrick and marquee whistle-blower law firm Phillips & Cohen, filed a second lawsuit under seal in U.S. District Court in Buffalo, N.Y., naming an unknown number of hospitals as defendants, and the U.S. attorney’s office in Buffalo launched a nationwide investigation.
“Kyphon reps were like flies on honey,” Clark said, recalling his experience with the HealthEast investigation. “Our folks were not aware there were employees receiving this advice,” Clark said. Complicating the matter, he added, Kyphon recruited outside physicians who pushed the company’s message in hospitals.
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