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Rex Healthcare to Pay $1.9M to Settle Fraud Claims

John Commins, for HealthLeaders Media, April 5, 2011

Rex Healthcare in Raleigh, NC has been ordered to pay the federal government $1.9 million, plus interest, to settle whistleblower allegations that its flagship hospital submitted false claims to Medicare to get pricier inpatient reimbursements for kyphoplasties and other minimally invasive procedures, the Justice Department announced this week.

The allegations arose from a whistleblower lawsuit filed in 2008 in federal court in Buffalo, NY, by Craig Patrick and Charles Bates, former employees of the medical device company Kyphon. The two men will receive a total of $80,000 of the settlement proceeds for kyphoplasty-related claims, DOJ said.

"We pursue cases like this because when hospitals submit false claims in order to increase their Medicare reimbursement, as we allege here, it artificially drives up the cost of healthcare, leaving taxpayers to foot the inflated bill," Tony West, Assistant Attorney General for the Justice Department's Civil Division, said in a media release announcing the settlement.

Rex Hospital is the second North Carolina hospital to settle Medicare fraud charges involving kyphoplasties. Presbyterian Orthopaedic Hospital in Charlotte paid the federal government more than $637,000 in December to settle fraud charges.

In May, 2008, Medtronic Spine LLC, the corporate successor to Kyphon Inc., agreed to pay the federal government $75 million to settle Medicare settle false claims allegations that it advised hospitals on how to improperly bill for the procedures. Since then, 26 hospitals have negotiated kyphoplasty settlements with DOJ.

The alleged improper billing at Rex Hospital took place from 2004 through 2007, DOJ said.

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