Houston hospital to pay $15.5 million to settle qui tam case involving secondary payer claims

March 28, 2007 -- A Houston-area hospital system will pay more than $15.5 million to the federal government to settle a whistleblower ("qui tam") lawsuit that exposed the hospital’s practice of billing Medicare and Medicaid for patients whose treatment wasn’t covered by the federal health programs.

Harris County Hospital District, which operates three hospitals and many community health centers and clinics around Houston, was wrongly billing Medicare and Medicaid for the care of jail inmates and for the treatment of people injured in automobile accidents.

“Congress passed the Medicare secondary payer provisions to make sure that hospitals seek payment from insurers who are responsible for the bill rather than automatically turning to Medicare,” said Mary Louise Cohen, a Washington, D.C., attorney, whose firm, Phillips & Cohen LLP, represents the whistleblower. “Harris County Hospital chose to make it easy on itself and simply bill Medicare.”

Medicare doesn’t pay for treatment of jail inmates unless they are required to repay the cost of medical services they receive while in custody. For injured victims in automobile accidents, hospitals must first bill auto insurance companies and wait four months for a response. Only after that waiting period can they bill Medicare and Medicaid if no money has been paid.

The “qui tam” (whistleblower) lawsuit was brought by Robert E. McCaslin Jr., who has worked in the hospital’s billing department for six years. He objected many times to hospital officials about the failure to follow the secondary payer provision. But they ignored him and didn’t change their billing procedures even after the hospital held a Medicare billing seminar that discussed proper procedures in auto accident cases.

McCaslin even went so far as to file an internal complaint when he first learned about fraudulent billing practices in auto accident cases. But a hospital official responded that “nothing had been done wrong.”

McCaslin filed his qui tam lawsuit in 2003 in federal district court in Houston. It was handled by the U.S. attorney’s office there.

“The recovery in this case is a direct result of the exceptional work of the U.S. attorney’s office, especially Assistant U.S. Attorney Andrew Bobb, and the Department of Health and Human Services Office of Inspector General, particularly Special Agent Jeannine Morgan,” said Matthew Smith, another Phillips & Cohen attorney who worked on the case.

The whistleblower lawsuit was brought under the False Claims Act, which allows private individuals to file lawsuits against entities that are defrauding the federal government. Those liable under the law may be required to pay up to three times the government’s losses plus up to $11,000 for each false claim.

Whistleblowers are entitled to a reward of 15 percent to 30 percent of the amount the government recovers as a result of their qui tam lawsuits.

Phillips & Cohen specializes in representing whistleblowers in qui tam cases. For more information about Phillips & Cohen's record, see P&C's Successful Whistleblower Cases.

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Case citation: United States ex rel. Robert E. McCaslin, Jr. v. Harris County Hospital District; No. H 03 4438.