Healthcare News & Insights

Hospital beats fraudulent billing lawsuit

Score one for the underdog: A Maryland hospital has been cleared of all charges in a False Claims Act lawsuit filed by the U.S. Department of Justice.

The government had accused Kernan Hospital, a rehabilitation hospital in West Baltimore, of purposely misdiagnosing Medicare and Medicaid patients with a rare nutritional disorder to collect more money for its treatment.

The disorder, kwashiorkor, is a severe protein deficiency commonly found in residents of impoverished nations.

An investigation by the Maryland Health Services Cost Review Commission revealed that Kernan was billing cases of the disease at an increased rate after state regulations began linking hospital pay to the complexity of the hospital’s caseload.

In response to the suit, Kernan defended itself by saying that kwashiorkor shares a secondary diagnosis billing code with a less severe general protein deficiency, which accounted for most of their cases. Because of a federal push to include more secondary diagnosis codes when billing for care, the code started coming up more often in the hospital’s billing records.

The hospital claimed it was treating a large number of patients with traumatic brain injury who had protein feeding tubes.  Close to 30% of its patients arrived with feeding tubes, according to a spokesperson from the hospital, and their care contributed to the increased rates of protein deficiency.

At trial, a U.S. district judge said the government provided no evidence that Kernan was billing the code solely to receive increased reimbursement from federal healthcare programs.

Although the government claimed that, over a four-year period, 23% of the hospital’s cases were unsupported by evidence, there was no proof of this at trial, so charges were dropped.

The judge’s decision did leave an opening for charges to be refiled if the government can find specific instances of fraudulent billing, but no further action has been taken yet.

Although Kernan seems to be off the hook for now, situations like this can arise at any hospital if the rationale behind patient care isn’t fully documented.

To prevent your billing records from falling under federal scrutiny, have your billing department complete an internal audit to ensure doctors have recorded the reason behind every treatment patients receive.

Make sure the codes your billers use match up with what the doctors have documented. That way, if the medical necessity of their care comes into question, there’s proof the treatments were valid.

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