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California hospital network to pay $37 million penalty for unnecessary procedures, overcharging patients

Friday, January 15, 2016 by: Ethan A. Huff, staff writer

Another plaintiff has successfully taken advantage of the Federal False Claims Act (FFCA), recovering $6.25 million for herself and more than $30 million for the federal government after a large, Northern California-based hospital network agreed to settle a lawsuit alleging misconduct and fraud against the Medicare system.

San Francisco-based Dignity Health has agreed to pay out $37 million to settle a 2009 whistleblower lawsuit filed by former worker Kathleen Hawkins, who says Dignity submitted many false and inflated Medicare claims between 2006 and 2010. According to the suit, 13 hospitals in the Dignity network routinely admitted patients for procedures they didn’t need, and over-billed Medicare for their procedures.

Simple outpatient procedures like installing pacemakers and heart stents, for instance, were billed as much more expensive inpatient procedures. Minimally invasive procedures like spinal cord compression operations were also overcharged to the federal government, with taxpayers ultimately footing the bill for this rampant fraud.

Dignity reluctantly fesses up to fraud that cost taxpayers billions
When Hawkins first filed an ordinance in San Francisco federal court, government authorities immediately launched an investigation into Dignity’s billing and accounting practices. They found that, throughout the network, over-billing was common, and that Medicare had been overpaying for brief hospital stays by about $5 billion, while unnecessary tests and procedures were costing it about $1.9 billion.

Dignity, which was formerly known as Catholic Healthcare West, initially denied the allegations and any wrongdoing. But the hospital later admitted that it had carried out diagnoses in medical cases that very easily could have been observed, and that some patients were admitted for expensive inpatient care when outpatient visits were technically more appropriate.

“Hospitals that attempt to boost profits by admitting patients for expensive and unnecessary inpatient hospital stays will be held accountable,” stated Health and Human Services (HHS) investigator Ivan Negroni, who helped lead the case. “Both patients and taxpayers deserve to have medical decisions made solely on what is best for the patient based on medical necessity.”

Justice Department has recovered $23 billion in false payments since January 2009
Hawkins filed her suit under the guidelines of the Federal False Claims Act (FFCA), which provisions for “whistleblower lawsuits” that involve fraud against the government. Any person who has knowledge of medical fraud can file a lawsuit using FFCA, and recover part of the judgment or settlement for themselves.

Since January 2009, the U.S. Department of Justice (DoJ) has gained back $23 billion in false payments through similar lawsuits filed using FFCA. Nearly $15 billion of this was recovered from cases involving fraud against federal health care programs such as Medicare.

“Charging the government for higher cost inpatient services that patients do not need wastes the country’s vital health care dollars,” said acting assistant attorney general Joyce Branda in a corresponding news release. “This department will continue to its work to stop abuses of the nation’s health care resources and to ensure patients receive the most appropriate care.”

One of the largest hospital networks in the U.S., Dignity currently operates 39 hospitals throughout California, Nevada, and Arizona. The hospital group has since agreed to enter a corporate integrity agreement with the Office of the Inspector General (OIG), which requires that companies hire independent review organizations to monitor and audit payment claims.

This integrity agreement will last five years, according to the San Francisco Business Times.

Sources for this article include:




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