Medical device-maker Kyphon allegedly trained its sales force to coach hospitals how to improperly schedule and bill kyphoplasty as an inpatient procedure. By billing as an inpatient procedure, the hospitals were able to wrongfully obtain additional government health care dollars for inpatient care that was typically a 1- 2-hour day surgery. After two Kyphon exposed this improper practice in a qui tam action, Kyphon settled for $75 million in 2008.

At the time of the Kyphon settlement, questions were raised about the culpability of the hospitals. However, in the ensuing months, hospital after hospital has made its way to the U.S. Justice Department, hat in hand, offering to settle with the government. With another seven hospitals inking settlement checks last week, a grand total of 25 hospitals have now settled FCA allegations, recovering more than $15.7 million for the Medicare Trust Fund.

The American Hospital Association is so troubled by these recent developments that they have sent a letter to U.S. Attorney General Eric Holder and Kathleen Sebelius, Secretary of Health and Human Services, requesting a review of the so-called “kyphoplasty initiative” being pursued by the Office of the United States Attorney for the Western District of New York. The AHA, looking to hide these hospitals behind an “everybody is doing it” defense, is attacking the valiant efforts of this extraordinary U.S. Attorney’s Office. However, instead of attacking those who uphold the law, the AHA should encourage its member-hospitals to abide by the law.

The simple fact is that these hospitals did not invent the fraud wheel for wrongful one-day inpatient stays. For years, concerns have been raised that hospitals have billed and received payment based upon an inpatient DRG rather than the APC payment, in cases where the beneficiary actually only needed outpatient services, such as kyphoplasty day surgery.  Indeed, the United States has routinely intervened in qui tam cases and/or otherwise recouped monies based upon lack of medical necessity for inpatient services. For example, in December 2007, St. Joseph’s Hospital in Atlanta, Georgia, agreed to pay $26 million to settle allegations concerning lack of medical necessity for certain inpatient care. The hospital falsely claimed Medicare reimbursement for inpatient admissions that were, in fact, less costly outpatient visits.

However, without the assistance of courageous whistleblowers, the government is generally unable to uncover these fraudulent practices. Thankfully for the public fisc, the Kyphon whistleblowers stood up, showed up , and suited up for the American people, exposing a wayward medical-device company and dozens of hospitals that were too eager to implement a fraudulent billing scheme.

For more information about qui tam law and Medicare fraud, contact Nolan and Auerbach, P.A.