P&C whistleblower case yields $20 million so far from hospitals for Medicare billing fraud Government announces today settlement by nine hospitals

WASHINGTON, May 17, 2010 - A whistleblower lawsuit that sparked a government investigation into the Medicare billing practices of hospitals for a back procedure known as "kyphoplasty" has resulted in the government recovering to date a total of $20 million from 18 hospitals.

This includes the settlements by nine hospitals in Alabama, Florida, Indiana, Michigan, Minnesota, New York and South Carolina, that the U.S. Department of Justice is announcing today. (See below.) Seven of those hospitals were named in the "qui tam" (whistleblower) lawsuit filed by Phillips & Cohen LLP in federal district court in Buffalo, NY, in 2008. Phillips & Cohen represents whistleblowers Chuck Bates and Craig Patrick, former employees of Kyphon Inc., which sold the equipment and materials used to perform kyphoplasty.

Comments of Matthew Smith, a Washington, DC, lawyer for Phillips & Cohen LLP:
"If it hadn't been for our two whistleblower clients, the government would have been unlikely to have found out what these hospitals were doing. Hospitals were getting away with overcharging Medicare by classifying kyphoplasty as a type of major back surgery requiring an in-patient stay."

"Once we filed a 'qui tam' lawsuit and our clients explained to the U.S. attorney's office in Buffalo how Medicare was being cheated, the government quickly investigated the allegations and has aggressively taken steps to recover funds the Medicare program needs to cover legitimate healthcare costs."

Comments of Mary Louise Cohen, a Washington, DC, lawyer for Phillips & Cohen LLP:
"Kyphoplasty generally can be performed safely on an out-patient basis. In many -- if not most -- cases, the only reason a hospital would keep a patient overnight after a kyphoplasty would be to increase the money it can get from Medicare."

"The U.S. attorney's office (USAO) in Buffalo has done an outstanding job leading the government's investigation and recovering taxpayer funds. We particularly want to thank for their hard work and skill Assistant U.S. Attorney Robert Trusiak, USAO investigator Peggy McFarland and USAO auditor Theresa Tetlow as well as Cindy Pangallo and Peggy Glynn, who are Department of Health and Human Services special agents."

Medicare fraud allegations against hospitals
Both the qui tam lawsuit and the government alleged the hospitals overcharged Medicare between 2000 and 2008 by performing kyphoplasty, a minimally invasive procedure, on an in-patient basis rather than as a less costly outpatient procedure. Hospitals can file larger claims with Medicare for in-patient stays, which increases their profits.

Medtronic Spine LLC, the corporate successor of Kyphon, paid $75 million to the federal government in 2008 to settle a related "qui tam" case that alleged Kyphon engaged in a sales and marketing scheme to defraud Medicare by advising hospitals to bill for kyphoplasty as an in-patient procedure.

The seven hospitals that were included in the whistleblower lawsuit and the amounts they paid to settle the charges are:

  • Ball Memorial Hospital, Muncie, Ind. ($1,995,431)
  • Bethesda Memorial Hospital, Boynton Beach, Fla. ($356,079)
  • Bloomington Hospital, Bloomington, Ind. ($1,443,848);
  • Genesys Regional Medical Center, Grand Blanc, Mich. ($931,742)
  • Huntsville Hospital, dba The Health Care Authority of the City of Huntsville, Huntsville, Ala. ($1,992,756)
  • Palmetto Health Baptist Columbia Hospital, Columbia, S.C. ($1,861,083)
  • St. Mary's of Michigan Hospital, Saginaw, Mich. ($260,065)

Two other hospitals have settled government charges:

  • St. Elizabeth Medical Center, Utica, N.Y. ($195,976)
  • United Hospital, St. Paul, Minn. ($428,656).

For more information about Phillips & Cohen's record, see P&C's Successful Whistleblower Cases.