Banner Health to pay $18 million to settle False Claims Act lawsuit

(Updated at 6:50 pm ET)

Banner Health will pay $18 million to settle a federal False Claims Act case accusing the not-for-profit health system of admitting Medicare patients who could have been treated as outpatients, the U.S. Justice Department announced Thursday.

The Justice Department accused Phoenix-based Banner of knowingly overcharging Medicare patients and billing Medicare for short-stay, inpatient procedures that should have been billed on a less costly outpatient basis. The claims are for patients seen from November 2007 through December 2016 at 12 of Banner's hospitals in Arizona and Colorado. It also said Banner inflated the number of hours that patients received outpatient observation care during that time period. The settlement resolves those allegations.

"Taxpayers should not bear the burden of inpatient services that patients do not need," acting Assistant Attorney General Chad Readler wrote in a statement. "The Department will continue its efforts to stop abuses of the nation's health care resources and to ensure that patients receive the most appropriate care."

Banner, which operates 28 acute-care hospitals, entered into a five-year corporate integrity agreement with HHS' Office of Inspector General that requires the system to retain an independent review organization to monitor the accuracy of its claims for services provided to patients covered under federal healthcare programs.

Former Banner employee Cecilia Guardiola filed the lawsuit under the FCA's whistle-blower provisions, and will receive roughly $3.3 million, according to the Justice Department.

Banner spokeswoman Becky Armendariz wrote in an email that Banner is fully committed to adhering to legal and regulatory requirements.

"Although the rules that dictate when a hospital can accommodate a physician's request to admit a Medicare patient are complex and evolving, our policy has always been to make those decisions in accordance with government guidelines," she said.

Banner's operating income was nearly $269 million on $7.8 billion in 2017 revenue, up 71% from $157 million on $7.6 billion in 2016 revenue, according to Modern Healthcare's Financial Database. The system's profit grew at an even faster clip last year, from $269 million in 2016 to $709 million in 2017, a nearly 164% jump.