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WASHINGTON, D.C. University Medical Center of Southern Nevada (UMC), a Las Vegas hospital, has agreed to pay the United States $1,163,488 to settle allegations of Medicare fraud, the Justice Department announced today.

The settlement relates to allegations that UMC violated the False Claims Act by "upcoding" a pneumonia diagnosis code. Upcoding is the practice of assigning false diagnosis codes i.e., diagnosis codes that were not supported by the physician's documentation in the medical records on claims submitted to Medicare in order to increase reimbursements.

Under Medicare, hospitals are reimbursed through the DRG (Diagnostic Related Groups) coding system in which hospitals assign diagnosis codes for each patient discharge and those diagnosis codes determine the DRG to which a patient discharge is assigned. Each patient discharge is assigned only one DRG and the Government's reimbursement is based on the assigned DRG. In this case, UMC was able to increase its reimbursements when it assigned a false, higher reimbursing pneumonia diagnosis code, rather than the correct, lower reimbursing diagnosis code.

"This settlement demonstrates our ongoing commitment to vigorously pursue allegations of fraud and abuse in Medicare and other federal health care programs," said Assistant Attorney General Robert D. McCallum of the Civil Division. "Hospitals as well as other health care providers can and will be held accountable for fraudulent billing practices."

The $1.16 million settlement includes a payment of $725,000 to be made within five days of the signing of the agreement and gives credit for $438,488 that was paid to the United States by UMC in 1999 after the government's investigation began. In addition, the agreement includes substantial corporate integrity provisions negotiated by the Department of Health and Human Services and UMC. The integrity provisions are designed to ensure continuing compliance by the hospital with the Medicare and other federal health programs.

"The U.S. Attorney's Office for the District of Nevada is committed to investigating and prosecuting allegations of health care fraud and abuse in Nevada," said United States Attorney Daniel G. Bogden. "This settlement is a clear indication of how critical private individuals and firms can be in the reporting and investigation of health care fraud."

Among other requirements, the provisions compel UMC to retain an independent review organization to perform regular billing and coding reviews including random claims reviews; provide coding and compliance training to employees; and retain a Compliance Officer and Compliance Committee with responsibility for developing and implementing policies designed to ensure compliance with federal health care program requirements along with meeting the requirements of the integrity provisions. Stipulated penalties are provided for in the event of a breach of the integrity provisions.

The qui tam or whistleblower lawsuit was originally filed in 1996 by Health Outcomes Technologies, a software company which provides products to health care providers. Under the False Claims Act, private individuals or firms can file suit on behalf of the government and share in any recovery. As a result of the settlement, the Doylestown, Pennsylvania-based company will receive a $162,888.32 share of the settlement.