Rex Healthcare to Pay $1.9M to Settle Fraud Claims

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.

Federal prosecutors have used the False Claims Act to recover $5.3 billion since January 2009 in cases involving fraud against federal healthcare programs. DOJ's total recoveries in False Claims Act cases since January 2009 have topped $6.8 billion. 

"We don't feel like we did anything wrong. We were following rules at the time but it was probably easier and cheaper to settle than to fight the government on this. We were performing this procedure on elderly frail patients in their 70s and 80s who were in excruciating back pain and they had a lot of problems like cancer and cardiac issues. Some even spent the night in the ICU due to their frail state. During that time we were following the InterQual third-party billing recommendations to bill this as an inpatient procedure. In 2007 when it was deemed to be an outpatient procedure we began billing it as outpatient. When the government decided to retroactively penalize people who had billed it as inpatient before 2007 we were caught with that. We didn't think we did anything wrong. We think it is unfair, but it was probably better to settle."