Hospital Company MedStar Can’t Dodge False Claims Act Charges

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By Matthew Loughran

MedStar Health Inc. must face claims it conspired with a revenue-cycle vendor to submit false admissions certifications for patients covered by Medicare ( United States ex rel. Graziosi v. Accretive Health, Inc. , 2017 BL 90282, N.D. Ill., No. 1:13-cv-1194, 3/22/17 ).

Judge Robert M. Dow Jr. of the U.S. District Court for the Northern District of Illinois March 22 refused to dismiss claims brought under the False Claims Act by a former employee of the Columbia, Md.-based hospital company. The employee said MedStar worked with the vendor, Chicago-based Accretive Health Inc., to change recommended patient treatments to increase the number of inpatient admissions at the hospitals.

The employee alleged the changes were made by individuals who weren’t qualified to judge the medical necessity of an inpatient admission for patients and with an eye toward providing a revenue boost for MedStar. Medicare paid more for inpatient admissions than it did for observation stays.

Hospital Sought Revenue Lift

“Accretive for a number of years peddled a practice to top hospital administrators at a significant number of hospitals around the country, convincing them that Accretive could provide to the hospitals what they called a ‘revenue lift’ particularly from the Medicare system,” Brad Pigott of Pigott & Johnson PA in Jackson, Miss., told Bloomberg BNA.

Pigott, who represents the MedStar employee, Cherry Graziosi, said the system was set up so that patients who were determined by physicians to only need observational stays would have to wait while MedStar employees faxed the medical documentation to Accretive and the vendor would second-guess the physician’s recommendations and instead issue a recommendation for inpatient admission, if possible.

“This whole enterprise was designed by Accretive to exploit the tension between the hospital administrators and the hospital’s own physicians over money,” Pigott said.

“Accretive induced hospital administrators to override both the professional integrity of their hospitals’ own doctors and the fiscal integrity of the Medicare system,” he said.

MedStar declined Bloomberg BNA’s requests for comment, citing a policy against commenting on ongoing litigation. Accretive, which changed its name in January to R1 RCM Inc., didn’t respond to Bloomberg BNA’s requests for comment.

Other Hospitals Dismissed

In the same order, the court dismissed claims against three other hospital systems, finding the employee hadn’t shown sufficient personal knowledge of arrangements between Accretive and those hospitals.

But Pigott said he expects that the discovery process will lead to his client being able to amend her complaint to add additional claims against those institutions. “We hope to see them again and hope for other hospitals to be held accountable for saying yes to this practice,” he said.

Representatives for the other hospitals didn’t respond to Bloomberg BNA’s requests for comment.

Graziosi is represented by Pigott & Johnson PA in Jackson, Miss. MedStar is represented by Drinker Biddle & Reath LLP in Washington. Accretive is represented by Kirkland & Ellis LLP in Washington. The other hospital systems were represented by Akin Gump Strauss Hauer & Feld LLP in Washington, Foley & Lardner LLP in Washington and Epstein Becker & Green PC in Washington.

To contact the reporter on this story: Matthew Loughran in Washington at

To contact the editor responsible for this story: Peyton M. Sturges at

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The court's opinion is at

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