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False Claims Act Violations Involving Overbilling Result in $12 Million Settlement

The Department of Justice has resolved a False Claims Act lawsuit involving overbilling Medicare for kyphoplasty procedures against 14 hospitals scattered across the United States, with the hospitals agreeing to pay a total of $12 million. This settlement resolves a small portion of the widespread fraud involving kyphoplasty procedures in this country. Since the U.S. Attorneys Office began investigating the fraud in 2008, 42 hospitals have settled with the government for a total of $50 million. In addition, Medtronic Spine, Inc., who is the corporate successor to Kyphon, Inc., has paid $75 million to settle related allegations.

Kyphoplasty is a minimally invasive procedure used to treat small spinal fractures that are often caused by osteoporosis. Because it is minimally invasive, Kyphoplasty can be performed as an out-patient procedure. However, Kyphon (now Medtronic, Inc.), who makes the device used in the procedure, advised hospitals to instead perform kyphoplasties as inpatient procedures, which would prompt larger reimbursement payments from Medicare. Consequently, the hospitals billed Medicare for a one-day hospital stay for each Kyphoplasty procedure.

These hospitals were making decisions based on an effort to maximize their recovery from Medicare, and not based on attention to the medical necessity for the services. Because the procedure did not require the hospital stay for which Medicare was billed, the hospitals’ overbilling constitutes false claims under the False Claims Act.

The fraud was brought to the government’s attention by two whistleblowers: a former reimbursement manager and a former regional sales manager for Kyphon. Under the False Claims Act, individuals who know about fraud against the government can file a whistleblower lawsuit, also sometimes called a qui tam suit, on behalf of the government. They are then entitled to a percentage of any recovery in the case. In this case, the relators will receive about $2.1 million.

The fourteen hospitals involved in this settlement include Plainview Hospital in Plainview, N.Y.; North Shore Syosset Hospital in Syosset, New York; Mission Hospital in Asheville, North Carolina; Gulf Coast Hospital in Fort Myers, Florida; Lee Memorial Hospital in Fort Myers, Florida; Cape Coral Hospital in Cape Coral, Florida; North Mississippi Medical Center in Tupelo, Mississippi; Community Hospital Anderson in Anderson, Indiana; St. John’s Mercy Hospital in Creve Coeur, Missouri; Wenatchee Valley Medical Center in Wenatchee, Washington and four hospitals that are part of the Adventist Health System/Sunbelt Inc. — Florida Hospital Orlando, Florida Hospital Heartland Medical Center, Florida Hospital-Oceanside, and Florida Hospital Fish Memorial.

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