Hospital Fraud

What is hospital fraud?

Hospital fraud under the False Claims Act encompasses a wide variety of schemes used by hospitals to increase reimbursements from federal and state health insurance programs, such as billing for unnecessary medical services or improper patient admissions, improperly seeking reimbursement for costs, billing for more expensive services than what was provided, and paying kickbacks to obtain patient referrals.

Some of the most significant qui tam cases brought by whistleblowers under the False Claims Act have involved misconduct by hospitals. Part A of the federal Medicare program, Medicaid and other government health programs cover the cost of hospital services and related ancillary services.

Each year, every hospital that participates in Medicare Part A must submit an annual cost report. The cost report sets forth a great deal of information pertaining to the costs incurred by the hospital, including, for example, information about the various procedures performed at the hospital (characterized by “diagnostic related groups,” or DRGs), the costs of devices and equipment purchased by the hospital, leasing costs, etc. This annual cost report is a “claim” within the meaning of the False Claims Act. The annual cost report is the basis for claims for reimbursement submitted not only to Medicare, but also to the Medicaid and TRICARE programs. In addition to submitting cost reports, hospitals bill payors (including Medicare, Medicaid, and TRICARE) for their costs on an interim basis throughout the year, using a Form CMS-1450 (formerly the Form UB-92).

As part of the annual cost report, the hospital must also certify its compliance with the laws and regulations regarding the provision of health care services. The certification specifically provides that “if services identified in this report were provided or procured through the payment directly or indirectly of a kickback or were otherwise illegal, criminal, civil and administrative action, fines and/or imprisonment may result.” (U.S. Dep’t of Health & Human Services, Ctrs. for Medicare & Medicaid Services, CMS 2552-96, Hospital and Hospital Care Complex Cost Report.)

Hospitals have defrauded the federal Government and violated the False Claims Act in many different ways. Fraudulent schemes involving hospitals have included, for example: (1) knowingly inflating certain costs included in the cost reports; (2) knowingly mischaracterizing certain items as reimbursable costs when, in reality, those items were not reimbursable; (3) knowingly manipulating patient admissions or treatments to inflate the costs that will be reimbursed for the patients’ stays; and (4) paying kickbacks to physicians or other health care providers in order to influence those providers’ decisions to refer patients to the hospital.

In addition, teaching hospitals have been successfully sued under the False Claims Act for billing Medicare for services that were performed by medical residents without the required participation of a supervising teaching physician.

VSG’s Qui Tam Attorneys Are Experienced in Handling Hospital Fraud Cases

VSG’s qui tam attorneys have been involved in several of the largest and most significant hospital fraud whistleblower cases. For example, VSG represented one of several qui tam whistleblowers who filed suit against Columbia/HCA for paying kickbacks to physicians in order to induce them to refer more patients to that hospital chain, resulting in a record-breaking recovery and an award to the relator of $5 million.

VSG represented an employee of Tenet Healthcare who successfully sued that hospital system for manipulating the cost reporting system by artificially increasing the amount of so-called “outlier” payments. VSG also represented an employee of the Adventist Health System in Orlando, Florida, who successfully sued that hospital for overcharging the government for the costs of ambulance services. In that case, the United States recovered $8.7 million, and the whistleblower recovered $1.5 million.

VSG is continuing to pursue significant hospital fraud cases, including qui tam whistleblower cases arising from fraudulent hospital admissions practices.