Rex, feds settle allegations of inflated Medicare claims

Government attorneys alleged that the hospital routinely submitted claims to Medicare for a variety of minimally-invasive procedures from 2004 through 2007 and classified them as inpatient admissions in order to increase its reimbursement from Medicare, despite the absence of medical necessity justifying the more expensive inpatient admissions.

“We pursue cases like this because when hospitals submit false claims in order to increase their Medicare reimbursement, as we allege here, it artificially drives up the cost of health care, leaving taxpayers to foot the inflated bill," Tony West, assistant attorney general for the Justice Department’s Civil Division, said in a statement.

Dr. Linda Butler, Rex's chief medical officer, said the hospital did nothing wrong and settled the allegations only because it didn't want to spend its resources fighting the government.

"You're going against someone with unlimited resources and you think to fight the claim would cost much more than to settle, so you basically settle," Butler said.

The allegations resulted from a whistleblower lawsuit filed in 2008 in Buffalo, N.Y., by two former employees of Kyphon, a company that specializes in procedures to repair fractured vertebrae. The employees will split $80,000 from the settlement, officials said.

Rex's settlement includes claims for kyphoplasty, where bone cement is injected into fractured vertebrae, performed by the Raleigh hospital, as well as other minimally-invasive procedures that the government contends were outpatient surgeries that shouldn't have received Medicare reimbursements for inpatient care.

Butler said that, for years, it was standard industry practice to perform such procedures as inpatient, but in 2007, the government changed its reimbursement policy to make it an outpatient procedure. The government also made that change retroactive to 2001 and demanded hospitals pay up, she said.

About 25 other hospitals nationwide have settled similar claims with the government, Butler said.

"Submitting inflated claims, as Rex Healthcare is alleged to have done, drains critically-needed dollars from government health care programs," Daniel R. Levinson, inspector general for the U.S. Department of Health and Human Services, said in a statement.