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Kyphoplasty False Claims Settlements Should Prompt Renewed Self-Audits

John Commins, June 3, 2010

The Justice Department's recent $9.4 million whistleblower settlement with nine hospitals that overcharged Medicare for minimally invasive kyphoplasties should prompt other hospitals that provided the inpatient spinal procedure to review their books for possible overcharges.

Brian Roark, a Medicare fraud litigation attorney with the Bass, Berry & Sims, PLC, in Nashville, says last month's False Claims Act settlements, an $8 million settlement with nine hospitals in 2009, and a $75 million settlement in May, 2008 with Medronic Spine, LLC, the corporate successor for Kyphon Inc., demonstrate that improper inpatient billings for kyphoplasties "obviously are on the government's radar screen right now."

"I don't know if this is the end of the lawsuits or not," Roark says. "There is some talk that the whistleblower lawsuit named dozens if not hundreds of hospitals, so there could potentially be other settlements or litigation that comes out of that one lawsuit."

"It would be wise—if a hospital hasn't already done this, if this procedure was being performed at your hospital—to do an internal audit and look at 'were we billing this on an inpatient or an outpatient basis?'" Roark says. "If you were doing it on an inpatient basis, do an audit of some of those claims and make sure you had a justifiable basis for billing Medicare on an inpatient basis."

If as a result of an audit of kyphoplasties you find issues, your hospital needs to consider repaying funds to Medicare. "That is an extremely important position and something that the hospital absolutely should discuss with its regular compliance counsel," says Roark. "Generally the right response is that you pay that money back to your fiscal intermediary. You don't necessarily have to self-report to the government. But if you believe there has been an overpayment, you need to pay it back."

Recent amendments to the False Claims Act make hospitals liable if they fail to pay back an overpayment within 60 days of learning about it. "It makes it of even more critical importance that when hospitals conduct these audits and find the overpayments they need to repay them promptly," Roark says. "If they don't the government is going to take the view that failure to repay could subject the hospitals to liability under the False Claims Act with all the damages and penalties that can flow from that."

Those penalties can include triple damages and per claim penalties of between $5,500 and $11,000.

"The mere fact that a hospital bills a claim incorrectly doesn't subject you to False Claims Act liability," Roark says. "But if you know you've been overpaid—and what 'know' means is you have actually knowledge or deliberate ignorance or recklessly disregard the truth—if you have that level of intent, it could subject you to liability."

Beyond the preemptive payback, Roark says your hospital must also figure out why you have billed incorrectly. "These audits are also an opportunity for hospitals to correct matters that may need to be corrected," Roark says. "You need to dig deeper to find out is there any reason why we billed these claims incorrectly. Is there anything we can do from an education or training standpoint? Do we need to make any changes to our procedures to make sure going forward that we are doing these correctly?"

In addition to self-audits, Roark says the kyphoplasty settlements should prompt hospitals to review their relationships with outside vendors. "Hospitals rely heavily on the expertise that outside vendors bring, which is completely appropriate," he says. "In light of this environment of heightened scrutiny, however, hospitals need to look closely at these relationships and see whether they are affecting any of the practices at the hospital."

One red flag indicating potential improper conduct could be employed physicians receiving any sort of remuneration from outside vendors. "That could be completely appropriate but it is something the hospitals would want to look at," Roark says.


John Commins is an editor with HealthLeaders Media. He can be reached at jcommins@healthleadersmedia.com.

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