Houston hospital pays more than $2 million to settle whisteblower’s allegations of excessive outlier claims, and double-billing for COVID-19 tests

by Ben Vernia | December 31st, 2023

On December 20, the Department of Justice announced that Houston-based United Memorial Medical Center had agreed to pay $2 million, plus additional contingent payments, to settle a whistleblower’s allegations that the hospital submitted claims for excessive outlier costs, and claims for COVID-19 tests that were also reimbursed by state and local agencies. According to DOJ’s press release:

Doctor’s Hospital 1997 L.P., doing business as United Memorial Medical Center LLC (UMMC), an entity that formerly operated hospitals in the Houston, Texas area, has agreed to pay $2 million, and to make additional contingent payments, to resolve alleged False Claims Act violations for claiming excessive cost outlier payments from government health care programs and for double billing the government for COVID-19 tests that were also billed either to the State of Texas or the City of Houston.

According to the settlement agreement between UMMC and the United States, the settlement funds will be paid by one of UMMC’s principals, Ravishanker Mallapuram, and UMMC has guaranteed the payment of those funds.  

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In addition to its standard payment system, Medicare and Tricare provide supplemental reimbursement to hospitals called “cost outlier” payments in cases where the cost of care is unusually high. Congress enacted the supplemental outlier payment system to ensure that hospitals possess the incentive to treat inpatients whose care requires unusually high costs. This settlement resolves allegations that UMMC submitted claims for cost outlier payments by rapidly increasing its charges for inpatient care and underreporting its charges on Medicare cost reports, thereby preventing the government health care programs from adjusting those charges so that they would reasonably reflect UMMC’s actual costs. The settlement also resolves allegations that UMMC concealed and improperly avoided its obligation to reimburse the federal health care programs for any excessive outlier payments its hospitals received.

In addition, UMMC has agreed to settle allegations that it submitted claims to the Health Resources and Services Administration’s Uninsured Program for COVID-19 testing services, despite being reimbursed for those same services by either the State of Texas or the City of Houston.  

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The government announced that the whistleblower will receive $300,000 of the initial payment (a 15% relator’s share).

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