Six Hospitals Pay $8.3 Million in Medicare Spine Surgery Case

Earlier this year, three Minnesota HealthEast Care System—St. Joseph's Hospital, St. John's Hospital, and Woodwinds Hospital in the Minneapolis-St. Paul area—paid $2.28 million to settle with the government.

In May 2008, Medtronic Spine (the corporate successor to Kyphon) paid $75 million to settle allegations that between 1999 and 2006, the company defrauded Medicare by counseling hospital providers to perform kyphoplasty procedures as an in-patient procedure, the Department of Justice stated.

"The allegations were that these hospitals kept these people overnight in order to turn an outpatient procedure into a hospital admission allowing them to capture the DRG [diagnostic related group] payment," says Matthew Smith, one of the three attorneys with Phillips and Cohen, a Washington, D.C. law firm specializing in qui tam lawsuits that represented the whistleblowers.

Those whistleblowers are two former employees of Kyphon Inc. Craig Patrick, of Hudson, WI, is a former reimbursement manager for Kyphon. Charles Bates of Birmingham, AL, is a former regional sales manager. They will receive $1.4 million, or 17.5% of the hospitals' settlement payments.

They independently went to U.S. Justice officials about their concern that the hospitals and their employer, Kyphon Inc., were violating the federal False Claims Act, Smith says. Kyphon sold a kit that was used in the procedure.

Smith explained that outpatient reimbursement for Kyphoplasty has climbed over time and is now reimbursed around $5,000. When hospitals billed for Kyphoplasty as an inpatient procedure, they were able to charge Medicare on average around $10,000 to $12,000, Smith says.

On June 29, the Department of Justice announced it was investigating hospitals around the country for similar improper inpatient kyphoplasty billings.