Carondelet Health Network Agrees to Pay $35 Million to Resolve False Claims Allegations

Carondelet Health Network recently agreed to pay $35 million to resolve False Claims allegations involving its operations at St. Joseph’s and St. Mary’s Hospitals in Tucson, Arizona. This settlement represents the largest False Claims Act recovery in Arizona history.

Specifically, it was alleged that Carondelet submitted false claims to Medicare, the Federal Employees Health Benefit Program, and Arizona’s Medicaid agency seeking payment for inpatient rehabilitation services despite the fact that certain patients should have received outpatient services instead because they failed to meet the necessary guidelines for inpatient services. The False Claims Act allegations resulted from bills that Carondelet submitted to federal health care programs over the course of seven years — from April 2004 to December 2011. Federal officials alleged that as a result of the claims for payment submitted by Carondelet, the federal health care programs paid substantially more than was appropriate for the services at issue as there is often a significant difference between charges for inpatient services charges and outpatient services.

The settlement resolves a lawsuit that was initiated by a whistleblower pursuant to False Claims Act provisions allowing private individuals to pursue claims under the Act. As a result of the settlement, the whistleblower will receive $5.9 million. In addition, it should be noted that the settlement was reached after Carondelet had already disclosed inpatient rehabilitation overpayments to the government and tendered a substantial settlement. However, based on its own investigation, the government had concerns related to Carondelet’s disclosure. The government was concerned that Carondelet’s disclosure and repayment was not timely, complete or adequate.

This case provides two important takeaways for health care providers. First, the False Claims Act’s whistleblower provisions provide a substantial incentive for individuals who are willing to come forward and pursue allegations under the False Claims Act. Because of the incentive for whistleblowers to bring claims under the False Claims Act, medical providers of all kinds would be advised to take a close look at their compliance programs to ensure that all potential issues are thoroughly investigated and vetted in order to resolve potential issues prior to the filing of a qui tam action by potential whistleblowers. Second, when investigating internal issues and making disclosures to the government, health care providers should be sure that the investigation was complete and timely. The government will continue to question allegations that have been disclosed in order to ensure such disclosures are complete.

Unnecessary Rehabilitation Therapy Services at Skilled Nursing Facilities Result in $3.75 Million False Claims Settlement

Life Care Services, LLC, a skilled nursing facility manager, and CoreCare V, LLP, the skilled nursing facility, agreed to pay the government $3.75 million to resolve allegations stemming from the alleged submission of false claims to Medicare for unreasonable or unnecessary rehabilitation services. It was alleged that the skilled nursing facility and the manager of the skilled nursing facility failed to properly supervise and prevent a rehabilitation services provider from providing unreasonable or unnecessary rehabilitation services to patients in order to increase Medicare reimbursement to the facility.

The litany of allegations the settlement resolved provides a look at issues the government may evaluate when determining whether unreasonable or unnecessary services were delivered. Those issues included the following: failing to reflect the lower amounts of therapy generally provided to patients over the course of their stay; failing to utilize individualized evaluations to determine the level of care most suitable for each patient’s needs; presumptively placing patients in the highest reimbursement level unless it was shown that patients could not tolerate that amount of therapy; providing the minimum number of minutes of therapy required to bill at the highest reimbursement level; and reporting estimated or rounded minutes instead of the actual minutes provided.

All health care facilities should have their compliance departments review the list of issues the government examined in this matter and should be made aware that these issues have been identified as potential areas of concern. Steps should then be taken to ensure those issues are not present at their facilities.

Westlake Cardiologist Indicted

A federal court recently unsealed the indictment of Westlake cardiologist Dr. Harold Persaud, in which he is charged with one count of health care fraud and 14 counts of making false statements, among other things. The indictment charged Dr. Persaud with performing unnecessary catheterizations, tests and stent insertions, and causing unnecessary coronary artery bypass surgeries as part of a scheme to overbill Medicare and other insurers. Law enforcement officials believe such conduct might have resulted in overbilling in the amount of approximately $7.2 million of which Medicare and private insurers paid approximately $1.5 million.

The alleged conduct causing the overbilling included the following: potential up-coding; performing potentially unnecessary medical tests; allegedly recording false test results in patients’ medical records to justify otherwise medically unnecessary procedures; and performing potentially unnecessary medical procedures.

This case serves as a reminder that in addition to potentially severe financial penalties under the False Claims Act, there is also the potential for criminal liability in some cases. Accordingly, such allegations are extremely serious in nature and effective education and compliance programs are essential in preventing substantial penalties.