DOJ Announces Settlement With Hospitals Over Kyphoplasty Medicare Billing Claims

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The Department of Justice Jan. 4 announced that seven hospitals will pay a total of more than $6.3 million to settle allegations that they submitted false claims to Medicare regarding kyphoplasty procedures.

According to DOJ's press release, the settlements resolve allegations that the hospitals overbilled Medicare for the minimally invasive procedure, which involves the artificial restoration of collapsed vertebrae, over a period from 2000 to 2008.

The government maintained that the procedure can be performed safely on a less-costly outpatient basis but that the hospitals performed the procedure on an inpatient basis to increase their Medicare billings.

William J. Hochul Jr., U.S. attorney for the Western District of New York, said: “These settlements show the continuing commitment by the U.S. Attorney's Office to investigate and recover any improper billings for kyphoplasty procedures which the hospitals inappropriately classified as inpatient, rather than outpatient.”

Hochul said these actions “not only protect taxpayers and the integrity of the Medicare program in the short term, they will in the long run help ensure optimal care for Medicare beneficiaries, by insisting that medicine, and not money, be used to determine the best course medical decision for a given case.”

Assistant Attorney General Tony West, with DOJ's Civil Division, said: “Hospitals that participate in the Medicare program must bill for their services accurately and honestly.” He said DOJ “is committed to ensuring that Medicare funds are expended appropriately.”

Initiative Criticized.

DOJ and the U.S. attorney's office have been criticized for their “kyphoplasty initiative.” In a September 2010 letter, the American Hospital Association (AHA) expressed concern that “the Western District has seized upon data analysis that flags billing errors and/or over-utilization and converted it into a presumption of [False Claims Act] liability, and that DOJ is using the threat of FCA liability as an audit tool” (14 HFRA 735, 9/22/10)(19 HLR 1272, 9/16/10)(174 HCDR, 9/10/10).

AHA requested in the letter that the joint DOJ/Health and Human Services Department Health Care Fraud Prevention and Enforcement Action Team (HEAT) undertake a policy review of enforcement initiatives proceeding under the FCA, beginning with the kyphoplasty initiative.

AHA said a number of investigations opened so far have been based on alleged Medicare billing errors and mistakes, which was not the intent of the legislation. DOJ representatives met with AHA President Richard Umbdenstock Nov. 22, 2010, to discuss these concerns (19 HLR 1742, 12/16/10)(14 HFRA 1020, 12/15/10)(4 MELR 862, 12/15/10)(237 HCDR, 12/13/10). A second meeting tentatively is scheduled for Jan. 24.

Commenting on the current settlements, AHA's general counsel, Melinda Hatton, said Jan. 4: “We are disappointed that the Department of Justice announcement make no mention of any attempt to address the serious and wide-spread problems with this investigation that we (AHA) brought to their attention in a September 7th letter and a subsequent meeting with DOJ officials.”

“These settlements,” Hatton said, “reaffirm our concerns that 'aggressive [False Claims Act] investigations are being initiated upon the discovery of evidence of a mistake or overutilization, making FCA enforcement through negotiated 'settlement' a self-fulfilling prophecy.' Nothing in today's announcement changes our view that the government needs to act expeditiously to assure the hospital community that its enforcement power is not misused to prosecute billing mistakes or legitimate differences in medical judgment.”

According to DOJ's Jan. 4 press release, the department has used the FCA to recover about $4.2 billion since January 2009 in cases involving fraud against federal health care programs. DOJ's total recoveries in FCA cases since January 2009 have topped $6.8 billion, the agency said.

More Settlements.

Earlier in 2010, nine hospitals settled government FCA claims concerning Medicare billings for the kyphoplasty procedure (14 HFRA 407, 5/19/10)(19 HLR 712, 5/20/10)(4 MELR 354, 5/19/10)(94 HCDR, 5/18/10).

They joined six hospitals in Indiana and Alabama that settled similar allegations in 2009 for more than $8 million (13 HFRA 777, 10/7/09)(187 HCDR, 9/30/09)(18 HLR 1297, 10/1/09), as well as three Minnesota hospitals that reached agreements with DOJ the same year (13 HFRA 434, 6/3/09)(3 MELR 406, 6/3/09)(18 HLR 688, 5/28/09)(97 HCDR, 5/22/09).

All of the allegations date back to a 2005 FCA qui tam lawsuit filed under seal in the U.S. District Court for the Western District of New York by relators Craig Patrick and Charles Bates, United States ex rel. Bates v. Kyphon Inc., W.D.N.Y., No. 05-6568, filed 10/26/05.

Patrick and Bates, both former Kyphon employees, alleged that the company counseled hospitals to perform kyphoplasties as inpatient procedures, even though they could be done on an outpatient basis.

Medtronic Spine Inc., which acquired Kyphon in the interim, settled the lawsuit against the company in 2008 for $75 million. This settlement, however, did not affect the status of the hospitals also named as defendants in the lawsuit.

Patrick and Bates will receive a total of $1.1 million as their share of the latest settlement proceeds.

The current settlement includes the following hospitals: Lakeland Regional Medical Center, Lakeland, Fla. ($1.7 million); the Health Care Authority of Morgan County--City of Decatur d/b/a Decatur General Hospital, Decatur, Ala. ($537,892); St. Dominic-Jackson Memorial Hospital, Jackson, Miss. ($555,949); Seton Medical Center, Austin, Texas ($1.2 million); Greenville Memorial Hospital, Greenville, S.C. ($1 million); Presbyterian Orthopaedic Hospital, Charlotte, N.C. ($637,872); and the Health Care Authority of Lauderdale County and the City of Florence, Ala., d/b/a the Coffee Health Group, f/k/a Eliza Coffee Memorial Hospital ($676,038).

By Mary Anne Pazanowski

Full text of the Lakeland Regional Medical Center settlement is at Full text of the Decatur General settlement is at Full text of the St. Dominic-Jackson Memorial Hospital settlement is at Full text of the Seton Medical Center settlement is at Full text of the Greenville Memorial Hospital settlement is at Full text of the Presbyterian Orthopaedic Hospital settlement is at Full text of the Coffee Memorial Hospital settlement is at

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