A whistle-blower lawsuit unsealed in a North Carolina court last week accused Carolinas Medical Center and N.C. Baptist Hospital of using their jointly-owned health plan to inflate expenses in order to boost reimbursement from Medicare and Medicaid, the Charlotte Observer reported last week.
The two hospital systems deny the charges. So far the federal government has refused to join the lawsuit.
The suit, filed by Joe Vincoli, a former manager at N.C. Baptist, alleges the two hospitals provided their employees with health insurance through a wholly-owned subsidiary called MedCost. The for-profit company administers health plans and contracts with hospitals and doctors' offices.
The hospitals' parent systems, Charlotte-based Carolinas HealthCare, which operates about 40 hospitals, and Winston-Salem-based Wake Forest Baptist, employ about 60,000 and 12,600 people, respectively.
N.C. Baptist Hospital said in a statement that it “fully cooperated with the government in its thorough investigation into the allegations and provided substantial documentation and information. We never believed the allegations had any validity.” Carolinas refused to comment to the newspaper.
The suit alleged both systems required employees to go through MedCost for their health benefits. The preferred provider organization plans then artificially inflated benefit expenses by negotiating generous contracts with the hospitals.
That would add tens of millions of dollars to Medicare reimbursement charges, the suit said, by inflating the regional wage index that the CMS uses to set local reimbursement rates.
Medicare requires hospitals to report any payments to organizations they own or control. The suit also alleges that the two hospitals hid MedCost's ownership structure. Under federal rules, hospitals can be forced to reimburse Medicare if they pay money to a related party without disclosure, the paper reported.
The suit also alleged inflating charges through the wholly-owned insurance arm harmed employees since it allowed the two systems to overcharge workers for their healthcare. The Labor Department is investigating those charges, the paper said.
