A recent outcome in a false claims act case reminds hospitals of the importance of ensuring that their coordination of benefits and Medicare Secondary Payer processes are sufficiently robust. On June 4, The United States District Court for the Southern District of Texas approved a settlement agreement in a qui tam action based on a hospital district's alleged failure to implement adequate coordination of benefits systems to assure that the Medicare and Medicaid programs were the payers of last resort. The Harris County Hospital District, operator of three hospitals, two specialty centers, twelve community health centers and various other health clinics executed a settlement agreement with the U.S Department of Justice, the Texas Attorney General, the Texas Health and Human Services Commission (collectively, “Government”) and the qui tam Relator in which the Hospital District agreed to pay $15.4 million to settle the case, almost $3 million of which will go directly to the Relator, a patient account representative employee of the Hospital District.

The allegations at the heart of the case involve claims made to the Medicare and Medicaid programs from March 1, 2000 through February 28, 2006. The Government and the Relator alleged that the Hospital District routinely submitted claims to Medicare and Medicaid without using “due diligence to seek out coverage primary to Medicare and Medicaid as required by each program's rules and regulations pertaining to coordination of benefits.” The Government alleged that as a result, both the Medicare and Medicaid programs paid claims that should have been paid by other responsible third party insurers. (The settlement also includes allegations of false claims made based on Medicare and Medicaid payments to the Hospital District for incarcerated individuals who were ineligible for benefits.)

Ober|Kaler's Comments: While by the terms of the settlement agreement the Hospital District made no admissions, and the Government and Relator made no concessions, the amount of the settlement should make hospitals take a hard look at their coordination of benefits (COB) efforts and their Medicare-as-Secondary Payer (MSP) systems to ensure that coordination is occurring, that MSP systems are robust and that they are conducting appropriate follow-up as outlined in relevant policies and procedures. Hospitals should refer to the Medicare Secondary Payer manual to ensure that their policies adhere to the appropriate requirements, keeping in the mind the potential for civil money penalties for regulatory violations.

A routine review of a hospital's MSP and COB efforts should be an integral part of the hospital's corporate compliance plan and auditing and monitoring schedule. As part of compliance monitoring, system gaps and vulnerabilities that fail to properly identify third party payers should be corrected. Word to the wise hospital– do not leave it to one of your patient account representatives to identify gaps in COB or MSP compliance. Identify such gaps first, fix the problem and avoid an outcome like the Harris County Hospital District.