Nebraska hospital pays $4 million to settle Medicare billing case brought by whistleblower

Oct. 30, 2006 -- St. Elizabeth Regional Medical Center has paid $4 million to the federal government and the state of Nebraska to settle a whistleblower lawsuit that alleged the Lincoln, Nebraska, hospital filed false claims for treatment of patients covered by Medicare and Medicaid.

The U.S. Department of Justice and the whistleblower contended that the hospital mischaracterized certain expenses related to its neonatal and burn units in “cost reports” filed with Medicare and Medicaid. The mischaracterizations, they said, resulted in overpayments to the hospital by both programs. Medicare and Medicaid reimburse hospitals based on expenses claimed in cost reports.

St. Elizabeth paid $2.8 million to the federal government and $1.2 million to the state of Nebraska to settle the fraud case. This is the fifth settlement by various hospitals stemming from the same “qui tam” (whistleblower) lawsuit, which so far has resulted in the federal government recovering a total of approximately $37.5 million.

Mark Razin, of Laguna Beach, Calif., filed the original whistleblower lawsuit in 1998 in federal district court in Los Angeles. Razin is a former employee of Healthcare Financial Advisors (“HFA”), a Medicare reimbursement consultant. He alleged that a number of hospitals that worked with HFA defrauded Medicare and Medicaid.

HFA, now owned by Certus Corp., offered to work with hospitals on their cost reports and to revise cost reports that had already been filed to find ways to boost hospitals’ Medicare and Medicaid payments. In exchange, HFA was paid a large percentage of the recoveries it generated for its clients through their cost reports.

“A big warning light should have flashed when HFA offered to increase St. Elizabeth’s Medicare payments,” said San Francisco attorney Michael P. Brown of Phillips & Cohen LLP, which represents the whistleblower. “Any time a company promises to increase a healthcare provider’s Medicare reimbursement, the provider has to examine closely the methods that are used to make sure they are legal.”

The government investigated the allegations and later joined the qui tam lawsuit. The U.S. Attorney’s office in Los Angeles is leading the government’s effort in the case.  Phillips & Cohen was assisted in the case by attorneys from the Washington, D.C., office of Heller Ehrman LLP.

There were four previous settlements stemming from Razin’s qui tam lawsuit:

  • Lovelace Health System, a wholly owned subsidiary of Cigna Corp. based in Albuquerque, New Mexico, paid $24.5 million in 2002.
  • St. Joseph’s Hospital in Houston, Texas, paid the government $1.5 million in 2002.
  • Eisenhower Medical Center, located in Rancho Mirage, Calif., paid $8 million in 2005.
  • HealthSouth Bakersfield Rehabilitation Hospital in Bakersfield, Calif., paid $740,000 in 2005.

The False Claims Act permits private individuals to file qui tam lawsuits against companies that defraud the government. Liable companies pay as much as three times the government’s losses plus penalties for each false claim. When the government joins the case, whistleblowers are entitled to 15 percent to 25 percent of the government’s recovery.

Phillips & Cohen’s practice is devoted exclusively to representing whistleblowers in qui tam lawsuits. For more information about Phillips & Cohen's record, see P&C's Successful Whistleblower Cases.