Arizona hospital company, Carondelet, pays $35 million to settle whistleblower suit alleging it submitted false claims for inpatient rehab services

by Ben Vernia | August 21st, 2014

On August 18, the U.S. Attorney’s office for the District of Arizona announced that Carondelet Health Network – which operates two hospitals in Arizona – agreed to pay $35 million to resolve allegations that it submitted unreimburseable claims to Medicare and Medicaid for inpatient rehabilitation services. According to the U.S. Attorney’s press release:

Carondelet Health Network, an Arizona non-profit corporation doing business as Carondelet St. Mary’s Hospital and Carondelet St. Joseph’s Hospital in Tucson, Ariz., has agreed to pay the United States $35,000,000 to resolve civil allegations that the hospitals violated the federal False Claims Act by submitting false bills to Medicare and other federal health care programs.

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The settlement agreement resolves allegations that from April 7, 2004, through Dec. 31, 2011, Carondelet St. Mary’s Hospital and Carondelet St. Joseph’s Hospital billed Medicare, the Federal Employees Health Benefit Program, and the Arizona Health Care Cost Containment System (Arizona’s Medicaid agency) for inpatient rehabilitation facility services that were not properly reimbursable under applicable coverage criteria because the patients were not appropriate for inpatient rehabilitation facility services. The United States alleged that as a result of these false claims, federal health care programs paid substantially more than was warranted.

Shortly before becoming aware of the United States’ investigation, Carondelet disclosed to the government some inpatient rehabilitation overpayments and tendered a substantial repayment. However, based on its investigation, the United States had concerns about the nature of Carondelet’s disclosure, including concerns that the disclosure and the repayment Carondelet tendered were not timely, complete, or adequate. Despite these concerns, the United States considered Carondelet’s efforts in this regard as one of several factors in reaching the settlement amount and the resolution of the case. The settlement is neither an admission of liability by the hospitals, nor is it a concession by the United States that its claims are not well founded.

The government has not yet disclosed the amount the relator will receive from the settlement.

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