Charlotte hospital agrees to pay millions over Medicare allegations

McClatchy NewspapersJanuary 4, 2011 

WASHINGTON -- Presbyterian Orthopaedic Hospital in Charlotte is one of seven U.S. hospitals that have agreed to pay more than $6.3 million to settle allegations they submitted false claims to Medicare, the Justice Department announced Tuesday.

The settlements resolve allegations that the hospitals overcharged Medicare, from 2000 and 2008, when performing kyphoplasty, a minimally-invasive procedure used to treat spinal fractures often due to osteoporosis.

The federal government contends the hospitals performed the procedures on an inpatient basis to increase Medicare billings when, in many cases, the surgery can be performed safely and with less cost on an outpatient basis.

“We are in complete disagreement with their conclusions,” said Presbyterian Healthcare spokesman Jim Tobalski. “We’ve settled because to continue to litigate with them would be too expensive.”

He estimated it would have cost more than $1 million to continue the legal action.

The case stems from a “whistleblower” federal suit filed in federal district court in Buffalo, N.Y., in 2008, by two former employees of Kyphon Inc., a company that sells hospital kits for use in the procedure. The whistleblowers, Craig Patrick and Charles Bates, reported independently to the federal Justice Department that company sales staff previously encouraged hospitals to charge taxpayers for the higher, inpatient rates.

According to a settlement between the hospital and the Justice Department signed by the hospital in September, Presbyterian also has agreed to pay Patrick and Bates $10,000 for attorney fees related to their civil case.

Physicians who began offering the surgery in Charlotte in 2000 believed it was best done as an inpatient procedure, Tobalski said. “These were all elderly patients who were suffering from spinal fractures.”

Over time, he said, doctors began offering the procedures on an outpatient basis. “That typically is the way new procedures (evolve), until there is a comfort level,” Tobalski said. “This happens all the time in medicine.

“The most important thing is that we provided the care that we billed for. The disagreement is that the federal government believes these elderly patients should have gone home sooner.”

Tobalski said physicians received a Medicare notice in late 2005 advising that the procedure should be outpatient. By that time, many doctors were performing outpatient kyphoplasty. But he said there was no such notice before then.

According to a settlement between Presbyterian and the U.S. Department of Justice, the procedures continued to be billed on an inpatient basis until May 31, 2008.

Presbyterian will pay $637,872.57, which includes $283,000 in alleged overpayments for 91 procedures, Tobalski said. Most of those procedures were performed between 2000 and 2005. Surgeons at Presbyterian Orthopaedic performed about 450 kyphoplasty procedures during the 8 1/2 year period in question, he said.

As part of the settlement, Presbyterian agreed to search its books for any other unallowable costs already submitted to federal health programs such as Medicare, Medicaid and the military’s TRICARE program. Any found would be repaid to the government. The Justice Department also held out the option of auditing Presbyterian’s financial records to make sure no more unallowable costs remained.

Other hospitals that settled in Alabama, Florida, Mississippi, Texas and South Carolina. The S.C. hospital, Greenville Memorial Hospital, will pay $1,026,764.01, according to the government news release.

These settlements follow others reached earlier with 18 other hospitals and with Medtronic Spine, the corporate successor to Kyphon. The company paid $75 million to resolve allegations that the company defrauded Medicare by counseling hospital providers to perform kyphoplasty procedures as an inpatient procedure instead of a minimally-invasive outpatient procedure, the government said.

“Hospitals overcharging Medicare take critically needed resources necessary to provide quality care and drive up health care costs,” Daniel Levinson, Inspector General for the U.S. Department of Health and Human Services, said in the news release. “When Medicare and taxpayers’ dollars are threatened, OIG and its federal partners will hold perpetrators accountable.”

The hospitals were named as defendants in a lawsuit filed under the False Claims Act in 2008 in federal district court in Buffalo, N.Y., by Patrick and Bates.

Patrick of Hudson, Wis., is a former reimbursement manager for Kyphon, and Bates was formerly a regional sales manager for Kyphon in Birmingham, Ala. As “whistleblowers,” they will receive a total of $1.1 million as their share of the settlement proceeds.

(Karen Garloch reports for the Charlotte Observer)

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