Sharp Healthcare settles qui tam case

Government tries to deny whistleblowers their just reward

Nov. 22, 1999 -- San Diego Hospital Association — the parent of Sharp Healthcare and San Diego's largest health care provider — has agreed to pay $825,000 to settle Medicare fraud charges brought in a qui tam case by two whistleblowers.

Joanne Schauble and Frank Millward alleged that Sharp improperly increased its revenues from Medicare by billing the government for services provided by attending physicians when those services actually were provided by physicians in training, or residents.

They also alleged that Sharp regularly "upcoded" it bills to Medicare, charging the government for a higher level of service than was actually provided.

Schauble, a former administrative liaison at Sharp's Grossmont Hospital, and Millward, a retired health care administrator, filed a qui tam (whistleblower) lawsuit against Sharp Health under the False Claims Act in federal district court in San Diego in 1997.

"Despite a government crackdown on false billings for attending physician services, Sharp continued this fraudulent practice," said Lisa Foster, a San Diego attorney with Phillips & Cohen LLP, which is representing the whistleblowers. "And if Joanne Schauble and Frank Millward had not blown the whistle, the government never would have known."

The lawsuit centered on Sharp's Family Practice Residency program, which provides specialized training in family practice medicine to residents. Under Medicare regulations, Sharp was not allowed to bill for services provided by the residents. Those services are covered by a supplemental payment Sharp receives from Medicare for training residents. If, however, a senior doctor, known as an attending physician, were actually present supervising and teaching the resident, Sharp was allowed to bill Medicare for the attending physician's services.

Medical records provided to the government by Schauble and Millward reflected only work performed by residents. Yet bills routinely were submitted to Medicare for work of attending physicians who often were not even in the hospital when the services were provided.

The False Claims Act allows any person with knowledge of fraud in a government contract to bring a lawsuit on behalf of the United States and to share in the government's recovery.

"Relators," as whistleblowers are called, are entitled by law to 15 percent to 25 percent of whatever money the government recovers as a result of their lawsuit, if the government joins the case. The percentage is supposed to be determined by the extent to which the relators contributed to the prosecution of the case.

The government joined Schauble and Millward's lawsuit and relied heavily on evidence the two provided. The U. S. attorney's office in San Diego has offered to pay Schauble and Millward 16 percent of the $825,000 recovery, an amount they have rejected as inadequate in light of their contribution to the case.

"Schauble and Millward built the government's case against Sharp, and they did so at great personal sacrifice," said Lisa Foster, a San Diego attorney whose firm, Phillips & Cohen LLP, represents the whistleblowers. "The government now wants to repay them by cutting their reward to almost the bare minimum."

Schauble was just seven years from retirement when she decided to report that her employer of 20 years was defrauding Medicare. Afraid of what might happen when Sharp learned that she had exposed their scam, she quit her job.

The question of Schauble and Millward's share will now be resolved by the court. Attorney Foster noted that under the Justice Department's own guidelines, Schauble and Millward should receive at least a 20 percent share.

"Joanne Schauble and Frank Millward did what their government asked them to do: They came forward with evidence of fraud," Foster said. "They should not now have to fight the government to get their just reward.

"If potential whistleblowers think they are going to have to fight the government to receive the reward that the law says they are entitled to, a lot fewer people are going to be willing to step forward," Foster added.

In addition to San Diego Hospital Association, the settlement also includes two other defendants: Grossmont Hospital and the Back Up Physicians Medical Group Inc. (BU Group). The BU Group provided physician instructors and other staffing for Grossmont Hospital.

For more information about this case, see the following news story:

  • "Sharp settles suit alleging fraud at Grossmont Hospital," Cheryl Clark, San Diego Union-Tribune, 11/23/99.