Cost reports and home health still under scrutiny

Tenet Healthcare Corp. subsidiary Lifemark Hospitals of Florida agreed to pay the government $29 million to resolve allegations that the hospital submitted false claims for Medicare home health services between 1994 to 1997, the Department of Justice announced July 17. Lifemark, which does business as Palmetto General Hospital in Hialeah, FL, was acquired by Tenet in March 1995.

The government contended the claims were based on false, fraudulent, and misleading statements or omissions regarding the patient’s medical condition, history, and/or eligibility for coverage by Medicare. It also alleged that the hospital’s submissions included claims for services that were not reimbursable by Medicare because they were not rendered; were provided by unskilled, unlicensed, or uncertified personnel; were based upon insufficient, forged, or missing documents; or were never ordered by a physician.

The government also alleged that certain cost reports Palmetto submitted between 1994 and 1997 improperly maximized its Medicare reimbursements through various means, including the reclassification of the costs of one of the home health agencies to the other two and the misallocation of certain capital-related, operating, nursing administration, cafeteria, and social services costs.

In a separate settlement dealing with the issue of cost reports, Catholic Healthcare West and its affiliate Mercy Healthcare Sacramento last month agreed to pay $8.5 million to settle allegations that it along with 13 of its hospitals defrauded Medicare by filing false cost reports.

This case involved not only reserve cost reports but an insider who brought a qui tam action, notes former federal prosecutor Robert Salcido, now with Akin Gump in Washington, DC. "I think that continues to be a red flag," he says. "One suit triggers the notion in many people’s minds about circumstances they are confronting, which trigger more lawsuits."

In this case, the government alleged that the hospitals kept two sets of books, one for government auditors and a second "reserve" or "booked" set hidden from the government that identified the unallowable and inflated costs included in the filed cost reports, according to assistant U.S. attorney John Vincent of the Eastern District of California.

The government also alleged that the hospitals established undisclosed reserves, setting aside funds to repay the government in case the unallowable costs were eventually discovered. The government also alleged that fraudulent submissions were made to the Medicaid and TRICARE/CHAMPUS programs.