Calif. Hospital Pays More than $3.6M to Resolve Allegations of Fraudulent Billings to Medicare

July 28, 2005

California’s Simi Valley Hospital and Health Care Services has paid the government $3,645,872 to resolve allegations that it submitted false claims to Medicare. Without admitting wrongdoing, the hospital agreed to pay the settlement to resolve a federal fraud investigation into the hospital’s billing practices.

Under the Medicare program, hospitals are reimbursed through the Diagnostic Related Groups – or DRG – classification system. When a patient is discharged, a hospital assigns a diagnosis code that determines the DRG, and that in turn determines the payment the hospital will receive for the treatment rendered to the patient. Simi Valley Hospital and Health Care Services was accused of routinely “upcoding” claims, meaning it submitted claims for more intensive or sophisticated levels of service than what had been actually documented by the hospital in the patients’ medical records.

The Department of Health and Human Services, which administers the Medicare program, undertook in 2000 a nationwide initiative to review compliance with pneumonia billing practices. As a result of this review, HHS investigators reportedly found evidence that from 1993 through 1998 Simi Valley Hospital obtained excessive Medicare reimbursement by classifying pneumonia cases as “severe respiratory infections,” a more serious form of pneumonia than was actually treated.

The government investigation showed that the questionable billing extended beyond Simi Valley’s classification of pneumonia cases. It included billing for septicemia, a life-threatening form of blood poisoning, rather than less serious forms of infection, and for classifying less serious respiratory problems as services provided to patients who are on mechanical ventilators.

The government received the $3.6 million settlement payment on July 19, 2005.

Simi Valley Hospital and Health Care Services also has entered into a corporate integrity agreement with the Department of Health and Human Services. The integrity agreement is designed to ensure continuing compliance by the hospital with Medicare and other federal health programs rules and regulations.

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