Dignity Health pays $37 million in false-claims action

Dignity Health has agreed to pay the government $37 million to settle allegations that more than a dozen of its hospitals knowingly submitted false claims to Medicare and TRICARE, the U.S. Department of Justice announced Thursday.

The government alleged that Dignity, one of the country's largest hospital systems, admitted patients who could have been treated as outpatients, which would have been less expensive, according to the DOJ.

In a statement released Thursday, San Francisco-based Dignity noted that the settlement agreement, “finds no improper conduct or admission of wrongdoing on the part of the health system” and “reflects Dignity Health's desire to resolve the investigation and avoid the expense of continued litigation.”

“The billing disputes reflect widespread confusion in the health care industry on unclear federal standards for approving coverage of patient admissions,” according to the Dignity statement. “As a result, it is often challenging for physicians to ensure their documentation adequately reflects their decision making in order to comply with complex regulations when making their best medical judgments.”

The government alleged that 13 Dignity hospitals in Arizona, California and Nevada billed Medicare and TRICARE, from 2006 to 2010, for inpatient care for some patients who had elective cardiovascular procedures such as stents and pacemakers. Those claims should have been billed as outpatient surgeries, the government contends. It also alleged that from 2000 to 2008, four Dignity hospitals billed Medicare for patients undergoing elective, minimally invasive kyphoplasty procedures—used to treat certain spinal compression fractures—that also should have been billed as outpatient procedures.

The government also alleged that 13 Dignity hospitals admitted patients who didn't medically need to be admitted and could have been cared for as outpatients or in an observation setting.

“Hospitals that attempt to boost profits by admitting patients for expensive and unnecessary inpatient hospital stays will be held accountable,” said Special Agent in Charge Ivan Negroni of the HHS' Office of Inspector General San Francisco office, in a statement. “Both patients and taxpayers deserve to have medical decisions made solely on what is best for the patient, based on medical necessity.”

The allegations were first brought forward in a whistle-blower lawsuit filed in the U.S. District Court for the Northern District of California under the False Claims Act by Kathleen Hawkins, a former Dignity employee. In successful lawsuits, whistle-blowers are entitled to a percentage of the money recovered by the government. Hawkins will receive about $6.25 million, the DOJ said.

Follow Lisa Schencker on Twitter: @lschencker