Judge dismisses Justice Department's suit against Kernan Hospital

A U.S. district judge dismissed a 2011 False Claims Act suit filed by the Justice Department against Kernan Hospital, a Baltimore hospital that does business as Kernan Orthopaedics and Rehabilitation.

The suit had accused Kernan of inflating its reimbursements by $1.6 million through diagnosis upcoding, such as by inappropriately diagnosing a rare form of malnutrition called Kwashiorkor, according to the lawsuit. For example, the government suit said that Kernan's patient population saw diagnoses of Kwashiorkor rise from zero in 2004 to 287 in 2007.

But Judge Richard Bennett ruled that the Justice Department did not follow proper procedures for the kind of suit it had filed, citing specific instances of alleged fraud. "The complaint alleges a complicated scheme in which the government contends Kernan sought to boost its case mix index in an effort to garner greater federal reimbursement, but utterly fails to link this scheme with any claims actually submitted," Bennett wrote in his dismissal.

"We are pleased that the court has dismissed the case," said Mary Lynn Carver, spokeswoman for Kernan's affiliated system, the University of Maryland Medical System.

Officials for the Justice Department could not be reached.