On January 4, 2011, the U.S. Department of Justice (DOJ) announced that seven hospitals, located in Florida, Mississippi, Texas, South Carolina, North Carolina and Alabama agreed to pay more than $6.3 million to resolve FCA allegations related to kyphoplasty, a procedure used to treat certain spinal fractures often related to osteoporosis. This announcement represents the fourth round of such settlements -- the government resolved kyphoplasty FCA claims with 18 other hospitals from 2009 to 2010. The 2011 settlements now bring the total amount paid in such cases to approximately $26 million.

These settlements illustrate the DOJ's continued aggressive pursuit of its fraud enforcement initiative relating to Medicare claims for kyphoplasty. The DOJ initiative stems from an FCA investigation in which it alleged that Kyphon -- a manufacturer whose medical device is used in the kyphoplasty procedure -- misled physicians and hospitals about the medical necessity of an inpatient stay following the procedure, as well as the use of particular billing codes related to the procedure and inpatient stay. The Kyphon case settled for $75 million. The 2011 settlements stem from whistleblower actions alleging the seven hospitals overcharged Medicare between 2000 and 2008 by performing kyphoplasty on an inpatient basis in order to increase reimbursement rather than performing the services as less costly outpatient procedures.

According to William J. Hochul, Jr., U.S. Attorney for the Western District of New York, "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."

As discussed in the September 16, 2010, issue of the Health Law Update, the American Hospital Association has expressed concerns over the aggressive nature of these investigations.