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Posted on Wed. Aug. 06, 2014 - 12:30 am EDT

Lutheran parent settles fraud case

To pay $98 million in whistleblower’s ’09 federal suit

More than five years ago, Nancy Reuille filed a whistleblower lawsuit against Lutheran Hospital’s parent company, accusing Community Health Systems of violating the federal False Claims Act.

On Monday, the U.S. Justice Department announced the massive hospital chain settled with the government for more than $98 million. The company was accused of knowingly billing government health care programs – Medicare, Medicaid and the Department of Defense’s TRICARE – for inpatient services that should have been billed as outpatient or observational services, according to a written statement from the government.

“Charging the government for higher-cost inpatient services that patients do not need wastes the country’s health care resources,” said Assistant Attorney General Stuart F. Delery for the Justice Department’s Civil Division in a statement Monday. “In addition, providing physicians with financial incentives to refer patients compromises medical judgment and risks depriving patients of the most appropriate health care available. This department will continue its work to stop this type of abuse of the nation’s health care resources and to ensure patients receive the most appropriate care.”

The state of Indiana will also receive a portion of the settlement because of losses to the Medicaid program.

While the company denies any wrongdoing, the settlement brings an end to Reuille’s lawsuit and eight others filed around the country against Community Health Systems and their hospitals. The company has 206 affiliated hospitals in 29 states.

In the lawsuits around the country, the Department of Justice alleged that from 2005 through 2010, the company engaged in a “deliberate corporate-driven scheme to increase inpatient admissions” of Medicare, Medicaid and the Department of Defense’s (DOD) TRICARE program beneficiaries over the age of 65 who originally presented to the emergency departments at 119 of Community Health Service’s hospitals, according to the written statement.

The government further alleged that the inpatient admission of these beneficiaries was not medically necessary, and that the care needed by, and provided to, these beneficiaries should have been provided in a less costly outpatient or observation setting.

More than $89 million will be paid by Community Health Systems to resolve those claims, with an additional $9 million to resolve similar claims about a hospital they owned in Laredo, Texas.

In her lawsuit filed in January 2009, Reuille, a former supervisor of case management for Lutheran Hospital, accused Community Health System and Lutheran of two specific fraudulent practices.

The first was false billing for 23-hour observation after outpatient surgeries and procedures, billing Medicare for times in which the patient was not even in the facility, according to court documents.

Reuille also accused the hospital of intentionally assigning “inpatient” status to “one-day stays” to allow fraudulent reimbursement of inpatient rates through Medicare, according to court documents.

Originally filed under seal, Reuille’s lawsuit was unsealed in 2010, shortly after the U.S. Justice Department declined to intervene in the case.

But the federal government changed its mind after noticing similarities between Reuille’s allegations and those in the other cases popping up around the country involving Community Health Systems, according to court documents.

As part of the settlement, the company is required to retain independent review organizations to review their claims for inpatient services to federal health care programs, according to the Justice Department.

For their part, the company thanked their employees for their loyalty and patience and attributed “shifting and often ambiguous standards” to allow for consistent compliance with regulations, according to a statement from Community Health Systems.

“Our organization is dedicated to high ethical standards as we strive to operate in a complex and ever changing regulatory environment. The question of when a patient should be admitted to a hospital is, and always has been, a matter of medical judgment by the individual physician responsible for a patient’s care,” wrote Wayne T. Smith, the company’s chairman and chief executive officer. “We are committed to doing our best, despite these challenges. Because this is an industry-wide issue, we hope the government will work to devise sound and reasonable rules for the important decision about whether to admit an individual for inpatient care, and we appreciate the opportunity to engage in meaningful dialogue with the government over these incredibly complicated issues.”

As one of the “relators” in the original lawsuits, Reuille can obtain a portion of the government’s recovery, according to the Justice Department.

That amount has not been determined.

An attempt to reach Reuille on Tuesday was unsuccessful.

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