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Eisenhower Pays $8 Million in Whistleblower Case

Sep 1, 2005 | The Desert Sun

Eisenhower Medical Center paid $8 million to the federal government on Monday to settle a "whistleblower" lawsuit, which alleged the Rancho Mirage hospital fraudulently overbilled Medicare and other federal health insurance programs from 1990 to 1998.

Eisenhower did not admit wrongdoing. Its president and chief executive officer, G. Aubrey Serfling, could not be reached for comment Wednesday, but the hospital released a statement that referred to the alleged practices as "overpayment" by the government rather than overbilling on its part.

"With the help of reimbursement experts advising both parties, Eisenhower Medical Center and the government were able to reach agreement on the amount of the overpayment, and Eisenhower is pleased that the matter was resolved appropriately," the statement said.

In 1998, Mark Razin filed the lawsuit under the False Claims Act, which allows individuals to file whistleblower or "qui tam" lawsuits against companies allegedly defrauding the government. It was filed under seal.

Razin was a consultant in the Newport Beach office of Healthcare Financial Advisors Inc.

"HFA was a consulting firm that was very aggressive in approaching hospital clients," Inman said.

In a press release, the United States Attorney's Office in Los Angeles, which negotiated the settlement, said the lawsuit claimed HFA assisted its clients in preparing two cost reports, "an inflated one that was submitted to Medicare and a second one, designed for internal use only, that more accurately reflected the amount of reimbursement the hospital should have received."

The California Department of Health and Human Services, Office of Inspector General and the Defense Criminal Investigative Service investigated the case.

"The settlement represents approximately double the damages," said Assistant United States Attorney Wendy Weiss in a phone interview from Los Angeles. "We hope we've had some impact on the industry."

HFA is now owned by Certus Corp.

"It mostly happened under HFA's watch," Inman said, noting search warrants were issued at a number of the company's locations after Certus took over.

Revised cost reports or "cost report reopenings" were a big part of HFA's business model, she said. "It was as if HFA approached you after you filed your tax return."

Through a contingency fee agreement, the company looked at past reimbursement claims to recover more money, and it got a big percentage of the "found money," Inman said.

With Eisenhower, HFA had filed cost reports and reopened filed returns, she said. "That's not a problem in and of itself."

The problem occurred when HFA allegedly overbilled on Eisenhower's Medicare cost reports from 1990 through 1998, according to the U.S. Attorney's Office in Los Angeles.

Those reports included "costs unrelated to patient care at the hospital," it stated. "The cost reports sought reimbursement for costs associated with an adult day care center, off-site clinics and a fundraising resale store, none of which are reimbursable by Medicare."

Eisenhower's statement noted the hospital "agreed to cooperate fully with the U.S. Attorney's Office, and Eisenhower provided all records associated with all cost reports."

The hospital added that the cost reports "had been routinely audited by the Centers for Medicare and Medicaid Services, the federal agency which oversees Medicare."

Razin filed the lawsuit in 1998 against Eisenhower and other hospitals that were clients of HFA. The Eisenhower case is the fourth settlement involving alleged cost-report fraud.

Houston, Texas-based St. Joseph's Hospital paid the federal government $1.5 million in 2002. Also that year, Lovelace Health System in Albuquerque, N.M., paid $24.5 million to the government. In 2004, Bakersfield-based HealthSouth Bakersfield Rehabilitation Hospital paid $736,410 to settle.