San Mateo County Medical Center and San Mateo County have agreed to pay $11.4 million to reimburse Medicare after inappropriately billing for millions of dollars for hospital stays that allegedly were not medically necessary under federal rules, the U.S. Department of Justice announced in a statement on Friday.
The medical center was accused of submitting claims to Medicare for inpatient and surgical admissions although the patients didn't qualify, according to a whistleblower lawsuit. The lawsuit was filed by Felix Levy, a medical center director of resource management, first in 2016 and was amended in 2017 and 2018.
The medical center was allegedly admitting into the inpatient units elderly, disabled and homeless patients who couldn't be sent home or couldn't care for themselves, despite their medical treatment having been completed. Because the patients' post-medical care needs could theoretically be met in residential care or skilled nursing facilities, they didn't meet Medicare's medical necessity standard, Dr. Chester Kunnappilly, CEO of San Mateo Medical Center, said in an Aug. 6 statement.
Under Medicare, the agency reimburses for "medically necessary" hospitalizations under the "two midnight" rule, which requires a stay that spans two midnights in order to reimburse a facility for inpatient care. Some of the patients didn't have a need to be hospitalized for the required length of time, according to the lawsuit.
After Levy came on the job, he found the medical center didn't have a written policy for billing Medicare as required under federal rules. It also didn't perform utilization reviews, which examines services that a hospital provides to patients that it bills to Medicare. San Mateo County Medical Center, however, had no such process in place for at least 10 years, according to the lawsuit, which was joined by the U.S. Department of Justice.
The medical center was audited in 2015 by a Centers for Medicare and Medicaid Services quality improvement contractor. Out of a sample of 10 claims, nine didn't meet the two-midnight criteria, yet the medical center had billed Medicare for the services. Even after that discovery, the medical center continued to inappropriately bill Medicare, according to the lawsuit.
Levy in August 2016 performed a one-month utilization review audit, which found a 65% error rate in the Medicare claims. In that one month alone, the medical center billed Medicare $484,000; $365,000 of which was inappropriately billed, according to the lawsuit. The total might've been much higher if the audit hadn't taken place. Of the 114 days the medical center billed to Medicare, 67 of those days for non-acute services would have been improperly billed if the audit hadn't occurred, according to the lawsuit.
Levy reported his findings to his supervisor, who allegedly told him to stay away from further involvement with the billing issues and to continue to submit bills regardless of whether they were proper or improper, the lawsuit alleged. Levy then took the matter to the billing manager, who returned the money for the wrongly billed charges to Medicare but only for the month of Levy's audit, August 2016.
He unilaterally instituted mandatory holds on bills for all Medicare-related claims starting with September 2016 and requested that a medical director be assigned to the utilization review unit. His superiors allegedly resisted Levy's efforts. He held a meeting with the medical center's top leadership and requested they issue a formal policy that was compliant with the law. Nothing changed despite their statements that they were dealing with the problems, the lawsuit claimed.
Under the settlement agreement with the Office of Inspector General of the Department of Health and Human Services, the county and medical center will pay $11.4 million of which $5.8 million is restitution, plus accrued interest on the settlement amount. The settlement is for violations that occurred from Jan. 1, 2013, through Feb. 28, 2017.
As part of the settlement, the medical center will be subject to a five-year Corporate Integrity Agreement that involves additional training and monitoring.
The settlement doesn't absolve the county and medical center from possible further financial payments, however. It requires the medical center to submit any reports and documents related to the center and its subsidiaries pertaining to past inappropriate billing, which can be adjusted against the current $11.4 million payment. The government can recoup additional payment and interest for any payments it has made for unallowed costs.
The medical center also agreed not to seek payment from any patients or their parents, sponsors, legally responsible individuals or third-party payers such as insurance companies for any of the health care billings covered in the settlement.
The medical center also agreed to provide any documentation to the government for investigating individuals and for potential criminal investigations.
In a statement, Kunnappilly said the medical center has fully cooperated with the Office of the Inspector General and the Department of Justice during the four years of investigation.
"We believe that this lengthy and in-depth investigation has revealed that SMMC has always made a good faith effort to bill these hospitalizations compliantly," he said. The investigation, however, did reveal that "there were instances when our systems failed to ensure that these types of stays were appropriately billed consistently."
As a safety net institution, San Mateo Medical Center will not discharge patients to an unsafe environment, he said. "And so when an appropriate level of care is not available, we are often forced to admit patients to the hospital or keep them in the hospital after medical necessity has ended.
"San Mateo Medical Center has a duty both to our patients and to the fiscal practices that support their care. The safety of our patients will always be our top priority, and we will not discharge patients to unsafe circumstances or to the street. As we care for these patients, we will continue to ensure that bills for hospital stays comply with federal standards," he said.
Stephanie M. Hinds, acting U.S. Attorney for the Northern District of California, said the financial viability of Medicare must be protected for current and future generations.
"Medical providers, such as SMMC, who seek to pass on the financial burden of their medically unnecessary hospital admissions to the federal government will be pursued, as today’s settlement reflects,” Hinds said.
Levy, the whistleblower, no longer works at the medical center, he said. His compensation from the government for turning in the county will be paid from the settlement funds, according to the settlement.
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