Rural Minnesota Hospital Survives a Fight with the Feds

The five-year False Claims Act litigation against a 15-bed critical access hospital in remote Western Minnesota has ended. Wheaton Community Hospital and Medical Center, which serves a 1,600-population farm community, will not have to close.

No more federal accusations that for six years, Wheaton defrauded the government. No more charges from the Office of Inspector General that the municipal facility unnecessarily admitted patients, some as old as 85, 91, and 96, or kept them hospitalized for "social" reasons or to raise "enough money to pay for the hospital addition."

No more allegations from a physician whistleblower that the hospital's main admitting physician and co-defendant in the case generated $4 million a year in billings, 13 times what the hospital's other physicians billed, in part by allegedly needlessly delaying patient discharges.

Last week, Wheaton Community settled the case and agreed to pay Uncle Sam $846,000 (plus another $187,000 in attorney's fees) so that the draining saga would no longer monopolize the city's resources. The co-defendant, osteopath Stanley C. Gallagher, who admitted most of the hospital's patients, paid an additional $283,000, according to the settlement.

What lessons did they learn, if any? Unfortunately, they aren't saying, in part because they are prohibited by a federal agreement from discussing the case in detail.

That's too bad because there are several lessons to be learned here. Maybe the hospital should have focused more on finding other less expensive and more appropriate facilities for its frail seniors who didn't need acute care. And maybe officials were a bit too blatant about the need to bring in lots more money to build an addition at the government's expense.

"We want to move on," says Jesse Tischer, who took over as administrator/CEO one year after the period in contention. "Our census is five (patients) or less every day, and we don't have a lot of resources to be dedicating a lot of time on this," he says. "Sometimes it's just not worth it to fight."

A corporate integrity agreement in which the hospital will be under tight federal scrutiny will keep officials busy, accounting for every patient's diagnosis, every test, every prescribed drug, and virtually anything else the hospital does or tries to do for the next five years.

Tischer and Gallagher don't think they had a choice, and gave me the impression they think federal officials were just picking on the little guy and that the feds didn't understand the peculiar issues in rural communities like Wheaton, where low-income elderly people who feel sick have no where else to go except an acute care setting.

"We had no nursing home, no assisted living, no home health available on weekends," says Gallagher, who admitted most of the patients. "Some of these people had to be admitted to the hospital. There was no other choice of what to do. Their kids had grown up and moved, so they had no family to take care of them at home. These patients presented by ambulance."

Tischer also says he's not sure there was an alternative. "I don't know there's a lot we could have done," the 32-year-old CEO says. "But I can tell you this, if I believed that any of these accusations were truthful, I wouldn't be here."

But for that agreement, says Tischer, "I would love to make all kinds of comments. But we're still under the watchful eye of government. We're under an agreement that says we will do what we're required, and what all facilities are required, in a document that allows the feds to come in and keep an eye through an Independent Review Organization."

A whistleblower, Steven P. Radjenovich, another Wheaton physician, received $203,150 in compensation as a reward for taking his concerns about overutilization to the feds. A follow-up audit revealed extensive problems.

According to the complaint obtained from the U.S. District Court for the District of Minnesota, the problem began when city-owned Wheaton Community Hospital wanted to build a "multimillion dollar addition."

At a public hearing on the plan held for the community in 2001, Gallagher "declared that the addition 'won't cost you a penny,'" according to the federal complaint.

Two years later, StratisHealth, the Centers for Medicare and Medicaid Services' Quality Improvement Organization (QIO) in Minnesota, reviewed Gallagher's patients and "found significant problems with the audited records, including a lack of documentation, a failure to provide proper care, and a lack of medical necessity," the complaint alleges.

"StratisHealth then notified Dr. Gallagher and Dawn Navratil, the QIO Liaison at Wheaton Community Hospital, of its findings," and informed then-CEO James Talley, according to the federal complaint.

"However, Wheaton Community Hospital took no action against Dr. Gallagher based on these complaints. Instead, the Mayor of the City of Wheaton, Janet Weick, asked StratisHealth to take no action to restrict Dr. Gallagher's practice because to do so would spell 'financial disaster' for the city," according to the complaint.

Officials allege that between Oct. 1, 1998 and Oct. 31, 2004, the hospital received "millions of dollars in reimbursement" for care of patients admitted by Gallagher, and that "certain of the claims . . . were false, in that the claims were made for in-patient care of Medicare beneficiaries which was not medically necessary."

Medical records of a random sample of 170 patients were pulled for review, and "a large number of Dr. Gallagher's admissions" were medically unnecessary, or were for an unnecessarily long period of time.

For example, an 85-year-old man was admitted for four days with poor appetite, back pain, and malaise, but no x-rays were taken and the patient was given oral pain medication and physical therapy. According to the complaint, "the admission was not necessary because it appears the admission was social in nature."

However, Tischer says that in rural communities like his "we rely on informal support structures, whether it be neighbors or others in the community. We have only one nursing home, and the beds are full. There's a larger philosophical discussion that needs to happen here," he adds, explaining that family members of those nursing home residents often live too far away.

"Where do we send the husband when his wife is barely able to care for herself, yet doesn't want to go to a nursing home and can't go to another community?"

Tischer says the accusations in the federal complaint, "we completely disagree with." But time passes. It's a new day.

In a statement last week, Tischer said that Wheaton has determined "that our time and effort was best spent providing quality health care to our patients and the medially underserved population surrounding us. We are committed to keeping our doors open to serve patients in need."

With all of the time and energy, not to mention the emotional drain of this health system nightmare, one would hope that someone in Wheaton learned something.