Raleigh, NC hospital pays $1.9 million to settle kyphoplasty allegations

by Ben Vernia | April 4th, 2011

The Department of Justice announced on April 4 that Rex Healthcare, a Raleigh, N.C. hospital is the latest defendant to settle a large qui tam involving allegations of false claims concerning kyphoplasty, an orthopedic procedure. According to DOJ’s press release:

Rex Healthcare, a 655-bed hospital in Raleigh, N.C., has agreed to pay the United States $1.9 million, plus interest, to settle allegations that it submitted false claims to Medicare, the Justice Department announced today. The government alleges that the hospital routinely submitted claims to Medicare for a variety of minimally-invasive procedures during the period 2004 through 2007, which the hospital classified as inpatient admissions in order to increase its reimbursement from Medicare, despite the absence of medical necessity justifying the more expensive inpatient admissions.

The allegations arise from a lawsuit that was brought under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private citizens with knowledge of fraud against the government to bring an action on behalf of the United States and to share in any recovery. The lawsuit was filed in 2008 in federal district court in Buffalo, N.Y., by former Kyphon employees Craig Patrick and Charles Bates. They will receive a total of approximately $80,000 as their share of the settlement proceeds for those claims related to kyphoplasty claims. The settlement also involves claims related to a variety of other minimally-invasive procedures that the hospital classified as inpatient admissions in order to increase its reimbursement when less costly outpatient visits would have been appropriate.

The case follows a May 2008 settlement with Medtronic Spine LLC, the corporate successor to Kyphon, Inc., and settlements with a total of 16 hospitals in May 2010, and January 2011.

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