A significant proportion of total False Claim Act violations, both in terms of actual number of cases brought and in terms of dollars lost to fraud, waste, and abuse, occurs within the health care field, including fraud by hospitals and medical facilities. According to the Government Accounting Office (the GAO), in 2010 hospitals and medical facilities were the targets of more than one-third of all civil fraud investigations. In today's world, health care is an enormous business, accounting for about $2.2 trillion in annual expenditures in the United States economy. Due to expansions, acquisitions, and consolidations, many hospitals are part of larger systems of hospitals owned and operated by single organizations, and a significant number of hospitals function as “for-profit” entities. Over the years, some hospitals systems have become notorious for their practices resulting in fraud, waste, and abuse, and for their repeated violations of the False Claims Act.
Why Hospitals and Hospital Systems Cheat the Taxpayers
Hospitals and hospital systems may engage in improper or illegal behavior at the expense of taxpayers in order to gain a competitive edge in the health care marketplace or to obtain greater reimbursements from the federal government than they are entitled to receive. These organizations often are motivated by the fact of simple greed for more, and greater, profits.
The types of improper behaviors that some hospitals may engage in include:
- Fraudulent coding of procedures, such as upcoding or unbundling
- Paying kickbacks to physicians or other health care organizations in order to induce patient referrals
- Performing and billing for medically unnecessary procedures
- Billing for services not actually performed
- Reporting higher than actual costs
- Entering into or having existing financial relationships with health care providers who refer patients
- Paying recruiters to deliver homeless Medicare or Medicaid beneficiaries by ambulance to the hospital for medically unnecessary treatments in order to bilk the government
When hospitals engage in such fraudulent behavior and submit claims for payment to government health care programs, such as Medicare, Medicaid, and TRICARE, they violate the False Claims Act.
Real World Examples of Recent Hospital and Medical Facilities False Claims Act Cases:
- 2012: Fourteen hospitals around the country paid a total of $12 million to settle False Claims Act lawsuits alleging overcharges to Medicare from 2000 to 2008. The whistleblowers contended that the hospitals performed kyphoplasties, minimally-invasive spinal procedures, on an inpatient basis, rather than as an outpatient procedure, in order to obtain a higher reimbursement from Medicare. The two whistleblowers received $2.1 million as their share of the recovery.
- 2010: St. Joseph Medical Center paid $22 million to resolve allegations that it violated the Federal Anti-Kickback Statute and the Stark Act. The whistleblowers claimed that the hospital entered into eleven professional service agreements with a cardiology group by which the group received excessive payments. In exchange, the cardiology group referred cardiac procedures to the hospital over a ten-year period. The whistleblowers received nearly $3 million as their share of the recovery.
- 2008: Staten Island University Hospital paid over $74 million to settle claims that the hospital defrauded Medicare, Medicaid, and TRICARE. The settlement resulted from two whistleblower lawsuits filed by a former employee and the widow of a hospital cancer patient. The former employee whistleblower alleged that Staten Island University Hospital billed Medicaid and Medicare over a six-year period for detoxification treatments when the hospital did not have a Certificate of Operation covering the beds in which the treatments were administered. The other whistleblower alleged that over an eight-year period the hospital billed Medicare for out-patient cancer treatments not covered under Medicare or TRICARE by intentionally using incorrect procedure codes. In total, the two whistleblowers received almost $9 million as a result of the settlement.
- 2003: In the largest health care fraud case in history, hospital chain, HCA, agreed to pay the government $631 million to resolve allegations stemming from nine False Claims Act suits. It was alleged that HCA defrauded the government in numerous ways, including by inflating cost reports, billing for claims initiated by kickbacks to physicians for referrals, and billing for unallowable costs.
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