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FOR IMMEDIATE RELEASE
Thursday, May 21, 2009
Minnesota Hospitals to Pay U.S. $2.28 Million to Settle False Claims Act Allegations

WASHINGTON – Three HealthEast Care System hospitals have agreed to pay the United States $2.28 million to settle allegations that the health care facilities submitted false claims to Medicare, the Justice Department announced today. All three hospitals are located in the Minneapolis-St. Paul, Minn., area.

The settlement resolves allegations that the St. Paul-based hospitals overcharged Medicare from 2002 to 2007 by thousands of dollars each time they performed kyphoplasty, a minimally-invasive procedure used to treat certain spinal fractures that often are due to osteoporosis. The procedure can be performed safely as an outpatient surgery, but the government contends that the HealthEast hospitals performed the procedure on an inpatient basis in order to increase their Medicare billings.

"The Department of Justice is committed to ensuring that Medicare dollars are spent appropriately, and we will prevent Medicare providers from profiteering by providing unnecessary services," said Tony West, Assistant Attorney General for the Department’s Civil Division.

The settlement with HealthEast follows the government’s May 2008 settlement with Medtronic Spine LLC, corporate successor to Kyphon Inc. Medtronic Spine paid $75 million to settle allegations that the company defrauded Medicare by counseling hospital providers to perform kyphoplasty procedures as an inpatient procedure even though the minimally-invasive procedure should have been done in many cases as an outpatient procedure.

"By keeping patients overnight, hospitals could seek greater reimbursement from Medicare and make much larger profits on kyphoplasty," said Kathleen Mehltretter, Acting U.S. Attorney for the Western District of New York in Buffalo.

St. Joseph’s Hospital, St. John’s Hospital and Woodwinds Hospital – all part of the HealthEast Care System – are the first hospitals to settle Medicare fraud allegations related to kyphoplasty claims. The hospitals previously paid $1.45 million after determining through a self-audit that they had overbilled Medicare for inpatient kyphoplasty claims that should have been billed as outpatient procedures. This amount has been credited against the total settlement of $2.28 million.

The qui tam or whistleblower lawsuit against the HealthEast hospitals was brought under the False Claims Act, which permits private citizens to bring lawsuits on behalf of the United States and receive a portion of the proceeds of any settlement or judgment awarded against a defendant. The lawsuit was filed in 2008 in federal district court in Buffalo, N.Y. by Craig Patrick and Charles Bates. Mr. Patrick of Hudson, Wis., is a former reimbursement manager for Kyphon, and Mr. Bates was formerly a regional sales manager for Kyphon in Birmingham, Ala.

The settlement with the HealthEast hospitals was the result of a coordinated effort by the U.S. Attorney’s Office for the Western District of New York, with assistance from the Commercial Litigation Branch of the Justice Department’s Civil Division, and the Department of Health and Human Services’ Office of Inspector General and Office of Counsel to the Inspector General.

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