The previous owner of University of Maryland St. Joseph Medical Center has agreed to pay the federal government $4.9 million for overbilling the Medicaid and Medicare system by keeping patients in the hospital longer than needed.
Catholic Health Initiatives, which recently sold the hospital to University of Maryland Medical System, did not admit to wrongdoing under the settlement announced Thursday. The medical company said in a statement that it wanted to avoid lengthy and costly court proceedings.
The settlement comes as Catholic Health Initiatives continues to deal with deep troubles that plagued St. Joseph when it was owner. The Denver-based company, which owns hospitals around the country, faces hundreds of lawsuits from patients who accused Dr. Mark Midei, once a star cardiologist at St. Joseph, of placing stents in the arteries of patients who may not have needed them.
It previously paid the federal government $22 million to settle separate allegations of a kickback scheme involving the cardiology practice where Midei once worked and to repay Medicare payments received for stents he implanted.
Catholic Health said the latest settlement is not related to the stent case, but declined to speak in depth about the issue.
University of Maryland took over the hospital in December but did not take on its liabilities. Catholic Health is responsible for any liability prior to Dec. 1, 2012. The university system referred questions about the settlement to Catholic Health.
The U.S. attorney's office in Maryland said that by keeping patients in the hospital for short stays of one or two days, St. Joseph was able to generate a larger reimbursement from the federal health care programs.
The unnecessary stays were discovered by a routine audit conducted by St. Joseph, which then alerted federal officials. The admissions, which occurred from 2007 to 2009, were not tied to any one doctor or department, a spokeswoman for Catholic Health said.
Terms of the settlement set aside $4.75 million for the federal government and $152,406 for the state of Maryland.
"Medical providers drain the resources of federal and state health care programs when they bill the government for unneeded medical procedures," Maryland U.S. Attorney Rod J. Rosenstein said in a statement.
The Centers for Medicare & Medicaid Services has cracked down on fraud over the past two years. It has worked more closely with local jurisdiction and adopted new technologies to catch culprits. The government recovered $4.1 billion in fiscal year 2011 and has recovered $10.7 billion from health care fraud in the past three years.
A spokesperson for the group Taxpayers Against Fraud said that keeping patients for unnecessary stays is just one of the ways hospitals try to defraud Medicare and Medicaid to boost profits.
But Patrick Burns applauded St. Joseph for disclosing the problem and said that is how the system should work.
"It's a huge difference if they self-reported," Burns said. "That means at least somebody inside the company has integrity and realized that the cost of avoiding the bad news was going to be worse than facing the bad news."
He said more stringent punishment should be put in place for those hospitals that aren't so honest. Fines aren't enough to stop the fraud, he said. He favors prohibiting top administrators at guilty medical facilities from working with the federal government again.
"They should never be able to work for company that does business with Uncle Sam again," Burns said. "That means as a medical administrator you're done."
University of Maryland has been working to turn St. Joseph around since taking over, including restoring the heart program.
The Midei case led to turmoil at St. Joseph, which lost patients and staff and was bleeding $3 million a month at the end of last year. The hospital's revenue dropped 25 percent in the wake of the Midei ordeal, from about $400 million to about $300 million in 2012. Its operating loss in fiscal year 2012, which ended June 30, was $24 million.
University of Maryland officials said restarting revenue growth will depend on increasing patient volume, and they acknowledge that it will take time to improve the hospital's finances and restore its reputation.
Midei has denied wrongdoing in the stent cases, saying that he did nothing inappropriate and that doctors across the country have recommended stents in similar circumstances. He said St. Joseph and Catholic Health used him as a scapegoat as the hospital faced scrutiny from federal authorities.