Calif. Hospital Pays $8M to Resolve Medicare Program Overbilling Allegations

September 2, 2005

The Eisenhower Medical Center in Rancho Mirage, California has paid the government $8 million to settle allegations that it fraudulently overbilled federal health insurance programs, United States Attorney Debra Wong Yang announced. The settlement amount was paid on Aug. 29, and the government received notice that a federal judge had unsealed allegations against Eisenhower contained in a “whistleblower” lawsuit.

The settlement resolves allegations made against Eisenhower in a lawsuit filed pursuant to the qui tam provisions of the False Claims Act by a former employee of Healthcare Financial Advisors (HFA), a consulting firm that assists hospitals in preparing cost reports that are submitted to insurers.

The lawsuit, which was filed in 1998, alleges that HFA helped its hospital clients seek reimbursement for unallowable costs. The lawsuit specifically alleges that HFA helped clients prepare two cost reports – an inflated one that was submitted to Medicare and a second one, designed for internal use only, that more accurately reflected the amount of reimbursement the hospital should have received.

The alleged overbilling occurred on the hospital’s 1990 through 1998 Medicare cost reports, which included costs unrelated to patient care at the hospital. The cost reports sought reimbursement for costs associated with an adult day care center, off-site clinics and a fundraising resale store, none of which are reimbursable by Medicare.

HFA’s preparation of, and Eisenhower’s maintenance of, second, undisclosed cost reports – labeled “conservative” or “for booking purposes only” for years 1990 through 1995, on which such costs were self-disallowed – bolstered the government’s theory that Eisenhower and HFA knew that the costs sought on the filed cost reports were unallowable for Medicare reimbursement.

Eisenhower paid the settlement without admitting any wrongdoing.

In 2004, another defendant named in the qui tam action, HealthSouth Corporation, paid the federal government $736,410 to resolve allegations that it submitted false claims in HealthSouth Bakersfield’s 1992 Medicare cost report.

In 2002, another defendant named in the qui tam complaint, Lovelace Health Systems, a New Mexico hospital and health maintenance organization owned by Cigna Corporation, paid the federal government $24.5 million to resolve allegations that it submitted fraudulent claims in 10 years of Medicare cost reports and reopening requests. The $24.5 million settlement was the largest settlement ever against a single hospital to resolve allegations involving solely cost reporting fraud.

Also in 2002, another defendant named in the qui tam lawsuit, St. Joseph’s Hospital in Houston, one of the CHRISTUS chain of hospitals, paid $1,569,000 to resolve allegations that it knowingly failed to disclose an overpayment made by the federal Medicare program.

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