The Department of Justice (DOJ) announced two significant False Claims Act (FCA) settlements in recent days that signal continued close government scrutiny of billing, coding and referral practices at hospitals.
On August 2, DOJ announced an $84.5 million dollar settlement with Michigan-based health system William Beaumont Hospital. The settlement resolves allegations of non-compliance with the Anti-Kickback Statute (AKS) and Stark Law arising from “improper relationships with eight referring physicians” that led to the submission of false claims to government health care programs.
DOJ alleged that the defendant provided compensation substantially in excess of fair market value (FMV) to the referring physicians in the form of free or below-FMV office space, as well as the use of hospital employees to support the physicians’ practices, in order to secure referrals from the physicians. DOJ further alleged that claims submitted by the hospital for services provided to illegally-referred patients violated the FCA. Interestingly, the allegations resolved by this settlement arose from four separate whistleblower suits, and pertain to alleged conduct from 2004 to 2012. That timeframe indicates that health care providers can continue to be exposed to significant potential liability for non-compliant conduct long after the underlying conduct may have taken place. In addition to the monetary payment, the defendant agreed to enter into a five year Corporate Integrity Agreement (CIA) with the Office of Inspector General (OIG).
The following day, on August 3, Prime Healthcare Services, Inc., two of its subsidiaries and fourteen of its hospitals (Prime), along with Prime’s Chief Executive Officer, entered into a $65 million dollar settlement with DOJ to resolve allegations of improper coding and billing practices at the hospitals. According to DOJ allegations, the hospitals knowingly violated the FCA by admitting patients to inpatient status who only required less costly outpatient care (such as observation care), and “up-coded” bills by coding more expensive diagnoses than patients actually had. DOJ claimed that this non-compliance was the product of a “corporate-driven scheme” to increase inpatient admissions of Medicare beneficiaries at certain Prime hospitals between 2006 and 2013. In addition to the monetary payment, Prime agreed to enter into a five year CIA with the OIG, which includes a requirement for independent review of claims for services provided to Medicare beneficiaries.