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Settlement means feds looking at charge levels
A recent settlement by a New Jersey hospital chain should alert risk managers that federal investigators are taking a harder look at charge increases and possible violations of Medicare rules, says an attorney who has been following the case.
Saint Barnabas Corp., a hospital chain based in West Orange, NJ, will pay $265 million to settle a pair of whistle-blower lawsuits that accused it of systematically inflating charges to Medicare patients in order to obtain higher reimbursements, according to an announcement by the U.S. Justice Department.
Saint Barnabus is the largest health care system in New Jersey and second largest employer in the New Jersey. The settlement could be followed by more because others are facing similar allegations, says Mark H. Gallant, JD, former deputy chief counsel for the Centers for Medicare & Medicaid Services (CMS) and current chair of the health law practice group with the Philadelphia law firm of Cozen O'Connor.
The settlement also might result in large rewards for the three whistle-blowers who prompted the federal investigation. The whistle-blowers claimed Saint Barnabas was abusing a Medicare provision that provides for supplemental payments for unusually expensive cases, known as outliers.
The Justice Department alleged that between October 1995 and August 2003, the nine hospitals operated by Saint Barnabas "purposefully inflated charges for inpatient and outpatient care to make these cases appear more costly than they actually were."
In a press release, Assistant Attorney General Peter Keisler, head of the Justice Department's Civil Division, said, "Today's settlement demonstrates the United States' determination to make sure health care providers do not overcharge the Medicare program." Saint Barnabas did not admit to any wrongdoing, but it entered into a "corporate integrity agreement" in which it promised to take steps to ensure compliance with Medicare regulations and policies in the future.
Risk analysis may be wise
Gallant cautions risk managers that it appears Saint Barnabus settled under the threat of having its hospitals shut out of the Medicare system. Furthermore, he isn't sure that the hospital chain did anything wrong.
"It is intriguing that there would be settlement in this case because the charges appear to stem from a loophole in the Medicare program that the government previously admitted existed," Gallant says. "This settlement will fuel the government's fire to go after other hospitals for increases in charges that were perfectly legitimate."
Gallant explains that the government now appears to be heavily and closely scrutinizing hospitals that engaged in aggressive charge level increases with an eye toward ferreting out abuses relating to Medicare outlier payments. Risk managers should be particularly vigilant if their hospitals have been subject to fiscal intermediary audits of charge increases in recent years. Risks are further enhanced for hospitals that may have selectively raised (or lowered) charges in their chargemasters with the goal of enhancing outliers, hospitals that may have done so on the advice of revenue consultants touting revenue maximization, and hospitals that raised their charges — even across the board — in the absence of a defined budgetary need or determination that the hospital's charges were below prevailing area levels.
Another "flash point — and a big problem under any reading of the rules" — would be including higher charges on UB92 billing forms for Medicare beneficiaries than for the equivalent diagnosis related group (DRG) or Current Procedural Terminology (CPT) codes billed to non-Medicare consumers or insurers, Gallant explains. "Hospitals in these situations may want to gird for an inquiry from by the Justice Department or the Office of Inspector General by performing an internal risk analysis," he says.
It is critically important that this review be done under the supervision of legal counsel, Gallant says. Otherwise, the hospitals internal findings will not be protected by legal privilege and will be fair game for a discovery request by federal authorities or private plaintiffs, such as other hospitals claiming that the offending hospital caused less money to be available for their federal outlier adjustments.
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