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UMass Medical Center settles fraud charges

Worcester’s UMass Memorial Medical Center has settled fraud charges with the attorney general in a whistle-blower case alleging that it improperly sent bills for uninsured patients to a homeless shelter, so it could tap the state for payments.

On dozens of occasions, the hospital sent unpaid bills for emergency care to an address where the patients did not live: 701 Main St. in Worcester, the location of the People in Peril homeless shelter, according to court documents unsealed Monday.

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The practice, described in a whistle-blower lawsuit in federal court in Worcester, allegedly established a phony patient address and a paper trail of dunning notices, so the hospital could then submit the bills to a state program for payment.

The hospital agreed to pay the state $66,000 in a settlement filed last month. The federal government, which the whistle-blower originally included as a plaintiff in the lawsuit, investigated the case but declined to pursue it.

Whistle-blower Nelson Castro, a former collections analyst at the hospital, said he learned of the billing practice when a Canadian patient called to settle an emergency room bill for thousands of dollars. Castro alleged that the patient’s address was listed as the shelter’s location. And the bill was already marked as paid.

Upon examining the department’s database, “hundreds, if not thousands” of entries appeared with the 701 Main St. address, according to Castro. However, state officials said the number of improper bills was in the dozens.

Despite the settlement, the hospital said it did nothing wrong. “UMass Memorial Medical Center has denied all allegations and has fully cooperated with the Massachusetts attorney general’s office in this matter, which is now fully resolved with a minimal payment,” a hospital spokeswoman, Margaret Thrappas, said in a statement.

She declined to say whether any employees had been disciplined or what the hospital had done to change its practices. “UMass Memorial’s quality process is comprehensive, and includes appropriate and applicable control standards,’’ Thrappas said in an e-mail.

The patients at issue had no health insurance, so the hospital would have had to pursue them directly for payment. Many of their addresses were unknown or in question; some were allegedly from other states or countries.

Castro’s complaint detailed an alleged scheme in which the hospital sent bills to the shelter as a “dead letter drop.” The hospital would send three letters per patient to the shelter within 120 days, he said, followed by a fourth sent by certified mail. The letters went unanswered, since the patients had no connection to the shelter.

By establishing a fake trail of Massachusetts residency, the hospital could then submit claims to the state for payment. The state, under certain circumstances, reimburses medical facilities for care provided to uninsured people through a pool called the Health Safety Net.

In the settlement, Attorney General Martha Coakley’s office said the hospital “knowingly caused claims for emergency bad debt to be submitted to the Commonwealth’s Health Safety Net office,’’ falsely using the shelter address to receive payments “to which the Commonwealth alleges UMass Memorial was not entitled.”

Castro had originally alleged a much larger number of false bills were sent to the shelter, garnering an estimated $10 million in fraudulent government payments. But the US attorney’s office, after investigating, determined the damage was far less than Castro alleged and mostly incurred by the state.

Some of the patients who received emergency care at UMass Memorial were in fact homeless, according to authorities involved in the case. Over a period of six years ending in 2009, the state paid $250,000 on up to 300 bills sent to the shelter, according to findings by those authorities, who spoke on condition of anonymity because those details were not disclosed in the court papers. It was unclear how many of the bills were proper.

“Our office conducted a thorough investigation of the whistle-blower’s allegations with the full cooperation of UMass Memorial,’’ Coakley spokesman Christopher Loh said in a statement. The settlement — $13,200 of which goes to the whistle-blower — also “ensures future compliance with reimbursement rules regarding emergency services for uninsured patients.”

One of Castro’s attorneys, Brian J. McCormick Jr. of Philadelphia, said he did not believe his client exaggerated the number of bills sent to the shelter. But, he said, “I’m confident in the AG’s investigation, and we’re pleased — we believe the conduct has been stopped.”

Beth Healy can be reached at beth.healy@globe.com.
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