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WASHINGTON, D.C. Roger Williams Medical Center, a hospital based in Providence, Rhode Island, has agreed to pay $400,000 to resolve allegations of Medicare fraud, the Justice Department announced today.

The settlement relates to allegations that the medical center violated the False Claims Act by "upcoding" a pneumonia diagnosis code. Upcoding is the practice of assigning false diagnosis codes i.e., a diagnosis code that is not supported by the physician's documentation in the medical record 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 codes determine the DRG to which a patient discharge is assigned. The government's reimbursement is then based on the assigned DRG. In this case, Roger Williams 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 the Medicare system," said Assistant Attorney General Robert D. McCallum of the Civil Division. "The Medicare system operates on the good faith and honesty of its providers, and we cannot tolerate misuse of the reimbursement system for financial gain."

Roger Williams also has entered into a corporate compliance agreement with the Department of Health and Human Services. The integrity provisions are designed to ensure continuing compliance by the hospital with Medicare and other federal health programs. The provisions compel Roger Williams to retain an independent review organization to perform regular billing and coding reviews including random claims reviews; to provide coding and compliance training to employees; and to retain a compliance officer and compliance committee with responsibility for developing and implementing policies designed to ensure compliance with federal health care program requirements and the integrity provisions. Stipulated penalties are provided for in the event of a breach of the integrity provisions.

This case was part of a qui tam or whistleblower lawsuit originally filed in 1996 by relator Health Outcomes Technologies. 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 $57,540.

The case was handled by the Justice Department's Civil Division, in collaboration with the Office of Inspector General for the Department of Health and Human Services.