Politics & Government

Whistleblowers’ lawsuit leads to massive medical fraud settlement

Thanks to a whistleblower lawsuit filed in part by a doctor at Lake Norman Regional Medical Center, federal prosecutors announced Tuesday that a former U.S. hospital chain will pay at least $260 million to settle false-billing and other claims.
Thanks to a whistleblower lawsuit filed in part by a doctor at Lake Norman Regional Medical Center, federal prosecutors announced Tuesday that a former U.S. hospital chain will pay at least $260 million to settle false-billing and other claims. Charlotte Observer file photo from 2000

What started seven years ago as a whistleblower lawsuit filed by two Charlotte-area doctors ended Tuesday with two emergency room physicians groups paying federal and state governments more than $33 million to avoid going to court.

The payments cap off longstanding allegations of a vast medical-fraud conspiracy between a major hospital chain and the physicians groups that bilked federal and state healthcare programs in North Carolina and five other states out of millions of dollars.

Under the settlement, EmCare of Dallas, Texas, will pay almost $30 million.

Lancaster, Pa.-based Physician’s Alliance Ltd. will pay $4 million.

At one time Emcare had more than 500 contracts to supply ER doctors to hospitals in North Carolina and other states.

The allegations against the groups first became public in 2010 after Thomas Mason and Steve Folstad, two members of the Charlotte-based Mid-Atlantic Emergency Medical Association, filed a whistleblower lawsuit charging Medicaid and Medicare fraud. Both physicians worked in emergency departments of Iredell County hospitals.

According to federal prosecutors, EmCare physicians took kickbacks and other inducements from Health Management Associates, a now defunct chain of acute-care hospitals, to recommend that their patients be admitted to HMA hospitals rather than receive outpatient care. Once their patients were admitted, the doctors would order expensive and unnecessary tests, upping the amount of Medicare and Medicaid reimbursements the hospitals would receive.

According to federal prosecutors in Charlotte, Health Management made EmCare’s contracts with HMA hospitals conditional on the group’s success in increasing the admission of emergency-room patients. On average, Medicare pays at least three times as much for inpatient treatment as outpatient care. The settlements covers activities alleged to have occurred between 2008 and 2012.

Prosecutors say Physician’s Alliance “accepted illegal remuneration” in return for referring patients to two HMA hospitals in Lancaster, Pa., prosecutors say.

In 2014, HMA paid more than $98 million to resolve seven whistleblower lawsuits, including one filed by Mason, the former emergency room director at Lake Norman Regional Medical Center in Mooresville.

U.S. Attorney Andrew Murray of Charlotte, whose office handled the case against EmCare, said the kickbacks paid to the company’s physicians compromised “sound medical decision-making” and drained American taxpayers of millions in unnecessary medical costs.

Under the terms of their original lawsuit, Mason and Folstad share in the governments’ recovery of money. The Justice Department says the pair will receive more than $6.2 million from the settlement announced Tuesday.

Philadelphia attorney Pamela Brecht said Mason and Folstad stood up to industry giants EmCare and HMA to reveal the irregularities. “This should be a wakeup call that the emergency room won’t be the front door to medical fraud,” she said.

Folstad had lengthy professional ties to Iredell County, serving as the longtime medical director of the county’s EMS while also heading the emergency department at Davis Regional Medical Center in Statesville.

Along with his duties at Lake Norman Regional, Mason was named North Carolina’s top emergency physician in 2006.

James Wyatt, the doctors’ Charlotte attorney, said Mason and Folstad followed their medical oaths by bringing the allegations to light.

“It has been rewarding,” he said, “to represent clients who have so much integrity, stood up in the face of constant pressure and continued to do the right thing for their patients.”

Do you suspect someone of committing fraud, waste, or abuse against Social Security? SSA’s OIG Fraud Hotline takes reports of alleged fraud, waste, or abuse.

Michael Gordon: 704-358-5095, @MikeGordonOBS

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