Washington, D.C. – The United States has reached a settlement with the District of Columbia (“District”) under which the District will relinquish its claims to more than $11 million to resolve allegations that St. Elizabeths Hospital submitted false Medicare Billings to the Department of Health and Human Services Centers for Medicare & Medicaid Services (“CMS”), U.S. Attorney Jeffrey A. Taylor announced today. The United States' claims were based on the False Claims Act, 31 U.S.C. § 3729 et seq.

St. Elizabeth’s Hospital is part of the District of Columbia Department of Mental Health and is the District's only public psychiatric hospital. St. Elizabeths is also the only hospital in the District that is required by law to accept involuntarily committed psychiatric patients. In order to receive payment from CMS, the hospital is required to submit a claim showing the number of visits made by the patient, and sufficient documentation demonstrating proper treatment as required by applicable regulations. The hospital is also required to file a "cost report" at the end of its fiscal year. The cost report includes the hospital's actual costs and the number of visits made during the cost report year.

The fraud allegations against St. Elizabeths Hospital stem primarily from egregiously inadequate documentation of billed outpatient services. The initial investigation concerned false claims submitted by the hospital during the period 1997-1998. In 2004, the investigation was expanded to include claims based on cost reports submitted since 1993.

Applicable regulations mandate that a psychiatric hospital making claims for Medicare payments must “maintain clinical records on all patients, including records sufficient to permit CMS to determine the degree and intensity of treatment furnished to Medicare beneficiaries.” 42 C.F.R. § 482.60. In addition, psychiatric hospitals must maintain certain other records to justify claims for Medicare payments. Among the several categories of records required to be maintained are written and individually tailored treatment plans, adequate documentation justifying each diagnosis, and detailed progress notes documenting the development of each patient’s condition.
The investigation revealed that claims for services were submitted despite chronic deficiencies in all categories of the mandated documentation. The combined overpayment by the Government for both claims submitted during the 1997-1998 period, and the false cost reports submitted by St. Elizabeths Hospital since 1993, was estimated to be several million dollars.
In addition, the hospital was potentially liable for treble damages and penalties under the False Claims Act.

Given the public benefit St. Elizabeths Hospital is charged with providing, and its status as the only public institution of its kind in the District, the United States agreed to seek a resolution that was forward looking, and that would result in expending the hospital’s limited resources on both meaningful accountability, and improved care for its Medicare and Medicaid beneficiaries. Although under the Settlement the District must relinquish $11,300,113 in funds withheld by CMS, the centerpiece of the negotiated resolution is a 5-year Corporate Integrity Agreement (“CIA”) with the HHS Office of Inspector General (OIG).

“This resolution presents a unique opportunity to bring about more accountability for the use of federal funds, while at the same time taking meaningful steps to improve patient care for the vulnerable patient population at St. Elizabeths Hospital,” said U.S. Attorney Jeffrey A. Taylor.

In exchange for the OIG's agreement not to seek an exclusion of St. Elizabeths from participation in Medicare, Medicaid, and other Federal health care programs, the CIA requires St. Elizabeths to appoint a Compliance Officer responsible for developing and implementing polices, procedures, and practices designed to ensure compliance with the CIA and Federal health care programs. The CIA further requires St. Elizabeths to establish an internal financial audit and review program, in addition to having an annual billing review performed by an Independent Review Organization. The CIA also sets forth, among other things, requirements for a Code of Conduct, policies and procedures, training and education responsibilities, establishment of a disclosure program, and an obligation to report certain events to the OIG. These compliance measures seek to ensure the integrity of Federal health care program claims submitted by St. Elizabeths, including the required individualized treatment documentation. Noncompliance with certain provisions of the CIA can result in stipulated penalties of up to $2,500 per day or exclusion.

In announcing the settlement, U.S. Attorney Taylor commended members of the following U.S. Department of Health and Human Services agencies: Office of Inspector General, Office of General Counsel and Centers for Medicare & Medicaid Services. In particular, he praised the outstanding efforts and assistance of former Senior Counsel Kelly Bagby; Office of Counsel to the Inspector General; Deputy Branch Chief Lisa Re, Administrative and Civil Remedies Branch, Office of Counsel to the Inspector General; HHS Office of the General Counsel/CMS Division attorney Julie Burns; and HHS/CMS Division Director Charlotte Benson. In addition, he commended Assistant U.S. Attorney Paul A. Mussenden, who coordinated the civil investigation and settlement discussions.