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From Health Law Daily, October 31, 2014

Dignity Health settles FCA claim of improper billing for inpatient services

By Jay Nawrocki, MA

Dignity Health has agreed to pay the federal government $37 million to settle allegations that it knowingly submitted false claims for inpatient services that should have been billed as outpatient services. This settlement comes as CMS has proposed a settlement with hospitals that have appealed thousands of claims for inpatient services, mainly observation services that should have been billed as outpatient services. The majority of those claim denials were the result of recovery audit contractors (RACs) determining that the claims for inpatient services were overpayments because the hospital should have billed them as outpatient services. As part of its agreement Dignity Health also entered into a five-year corporate integrity agreement with HHS’ Office of the Inspector General (OIG).

Inpatient services. Dignity Health is one of the five largest healthcare systems in the country. It was formerly known as Catholic Healthcare West. It was charged by a qui tam relator and joined in that charge by the United States government that it knowingly filed claims for inpatient services between 2006 and 2011 for inpatient service that are commonly performed as outpatient procedures in violation of the False Claims Act (FCA). It was charged that at its 13 hospitals it performed elective cardiovascular procedures such as the implanting of stents and pacemakers as well as elective kyphoplasty procedures, which are minimally invasive and treat certain spinal compression factors as scheduled inpatient surgeries, when these procedures are commonly performed as outpatient procedures.

“Hospitals that attempt to boost profits by admitting patients for expensive and unnecessary inpatient stays will be held accountable,” said Special Agent in Charge Ivan Negroni of HHS’ OIG San Francisco office in a Justice Department press release. “Charging the government for higher cost inpatient services that patients to not need wastes the country’s vital health care dollars,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division. The qui tam relator in this case, a former employee of Dignity Health, will receive $6.25 million as a result of the settlement.

RACs action.CMS reported that during 2013 RACs determined that $3.4 billion worth of claims submitted by hospitals resulted in overpayments because RACs determined that those services were not reasonable or necessary (see CMS reports on RACs 2013 performance, September 30, 2014). Similar to this case, RACs determined that services were provided in an inpatient setting and should have been provided in an outpatient setting. During 2013, CMS reported that 836,840 appeals of RAC overpayment determinations were filed by providers. The American Hospital Association has stated that it believes that nearly $1.5 billion worth of claims are currently being appealed because of this issue.

CMS’ solution. To address this large number of appeals filed during 2013 CMS offered hospitals a settlement amount for claims that were denied because the service was provided on an inpatient basis when it should have been provided in an outpatient setting (see CMS offers partial payment for certain Part A hospital claims under appeal, September 3, 2014). Hospitals that applied for the settlement offer by today, October 31, 2014, will receive 68 percent of the allowable amount for all claims in the appeals process for which the inpatient status of the claim is being appealed. Only claims with dates of admission prior to October 1, 2013, are eligible for the settlement offer as CMS believes that the two-midnight rule adopted in the update to the Inpatient Prospective Payment System for fiscal year 2014 addressed this issue in such a manner as to correct this problem.

HEAT action. The case against Dignity Health, filed in November of 2009, was brought under the FCA and was investigated under the auspices of Health Care Fraud Prevention Enforcement Action Team (HEAT) which was begun in May of 2009 as a joined effort between HHS and the Justice Department. Since that time the Justice Department has recovered more than $14.8 billion through FCA cases involving fraud against federal health care programs. “This department will continue its work to stop abuse of the nation’s health care resources and to ensure patients receive the most appropriate care,” said Acting Assistant Attorney General Branda.

MainStory: TopStory ComplianceNews IPPSNews FraudNews FCANews QuiTamNews ClaimsAppealsNews PaymentNews RACNews

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