Carondelet to Pay $35M to Settle Fraud Allegations

The agreement reached between the Department of Justice and not-for-profit Carondelet Health Network to resolve whistleblower allegations is Arizona's largest False Claims Act recovery, says the US Attorney handling the case.

For the second time this month a hospital chain has agreed to pay tens of millions of dollars to the federal government to resolve Medicare fraud allegations.

Arizona's Carondelet Health Network has agreed to pay the federal government $35 million to resolve whistleblower allegations involving fraudulent inpatient billings to Medicare and other federal healthcare programs.

Federal prosecutors said that from April 7, 2004, through Dec. 31, 2011, Carondelet St. Mary's Hospital and Carondelet St. Joseph's Hospital improperly billed Medicare, the Federal Employees Health Benefit Program, and Arizona's Medicaid program for inpatient rehabilitation services that should have been done in a less-costly setting.

"Shortly before becoming aware of the United States' investigation, Carondelet disclosed to the government some inpatient rehabilitation overpayments and tendered a substantial repayment," says a Department of Justice media release.

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"However, based on its investigation, the United States had concerns about the nature of Carondelet's disclosure, including concerns that the disclosure and the repayment Carondelet tendered were not timely, complete, or adequate."

Catholic-sponsored, not-for-profit Carondelet offered to return $24 million in 2012. Though the amount was deemed insufficient, federal prosecutors said this week that the attempt at restitution was "one of several factors in reaching the settlement amount and the resolution of the case." The settlement is not an admission of liability by the hospitals, or a concession by prosecutors that the claims are not well founded, the Justice Department said.

Carondelet said in its own media release that the investigation never involved allegations that patients were harmed or received compromised care.

"As a leading healthcare provider in Southern Arizona, Carondelet is dedicated to enhancing the health and well-being of this community and this region," Carondelet CEO and President James K. Beckmann said in the media release.

"As a part of that promise, we hold ourselves accountable to the highest standards of integrity. I commend our leadership team who reviewed, audited and voluntarily disclosed our past billing discrepancies. We are proud of our proactive Corporate Responsibility Program and our ability to identify and resolve these issues that occurred some years ago."

The settlement does not require the health network to submit to a corporate integrity agreement, "due to the strength" of its corporate responsibility program," Carondelet said in the media release.

John S. Leonardo, the US Attorney for the District of Arizona, said in prepared remarks that the settlement "is the largest-ever False Claims Act recovery in Arizona, and it reflects the longstanding and ongoing efforts of our office to guard the vital, but limited funding of federal healthcare programs."

"Inpatient rehabilitation services are very costly to taxpayers, and it is critical that these federal dollars be reserved only for those qualified patients who need the intense rehabilitation therapy services provided in an inpatient setting," Leonardo said.

The settlement resolves a whistleblower lawsuit filed in 2011 by Jacqueline Bloink. These suits allow private citizens to bring civil actions on behalf of the federal government and share in any recovery.

Bloink's relationship with Carondelet and her share in the settlement were not disclosed in the Justice Department media release. Attempts to contact Bloink, who now runs a compliance consulting firm, were unsuccessful. However, the Arizona Daily Star reported that Bloink, a former employee of Carondelet, stands to receive $6 million from the settlement.

This week's settlement marks the second time in three weeks that a hospital chain has paid out tens of millions of dollars to the federal government to resolve Medicare fraud allegations.

On Aug. 4 the Justice Department announced that the federal government would accept a $98 million payment from Community Health Systems Inc. to settle system-wide fraud allegations at the Franklin, TN-based for profit hospital chain.

This week, the Justice Department issued a copy of the corporate integrity agreement binding CHS for the next five years.