Medicare reimburses health care institutions for certain costs in addition to paying for individual procedures and treatment.

Virtually every hospital and many other providers submit cost reports to Medicare, which are used to calculate how much the government will reimburse the provider for expenses related to patient care. This includes the costs of capital improvements like new medical equipment and bigger wards. Over the years, cost reports can represent billions of dollars in payments for some providers.

Providers who knowingly inflate the costs they incurred, mischaracterize the nature of those costs or give the wrong percentage of their services dedicated to Medicare patients are liable under the False Claims Act.


HCA Inc., the nation’s largest for-profit healthcare provider, paid $631 million to the government to settle two qui tam lawsuits brought by whistleblowers represented by Phillips & Cohen and an unrelated kickback case. The whistleblowers alleged that the company had inflated expenses for reimbursement claimed in annual Medicare “cost reports.”

Quorum Health Group Inc., at that time the nation’s largest hospital management company, paid $85.7 million to the federal government to settle a whistleblower lawsuit brought by a Phillips & Cohen client. He alleged Quorum had filed fraudulent Medicare “cost reports” for hospitals it managed and owned.

Sharp Memorial Hospital, a San Diego hospital, paid the federal government $6.2 million to settle a qui tam lawsuit brought by a whistleblower represented by Phillips & Cohen attorneys. The qui tam lawsuit alleged Sharp defrauded Medicare by filing fraudulent claims for reimbursement for costs associated with its heart and kidney transplant centers. These included the costs for employees whose work was unrelated to organ acquisition and so was not reimbursable by Medicare and costs that were essentially illegal financial inducements for physicians to refer patients to the organ transplant centers.

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