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Beth Israel Deaconess settles with US for $5.3m

Hospital’s billing faulted

Faced with government allegations of improper billing, Beth Israel Deaconess Medical Center paid $5.3 million Monday to settle claims that it overcharged Medicare by admitting patients who should have been treated less expensively as outpatients.

The allegations involved patients who were admitted to the Harvard teaching hospital for brief stays between 2004 and 2008 and who were suffering from congestive heart failure, chest pain, gastroenteritis, and nutritional and metabolic disorders, federal officials said in a written statement.

By classifying the patients as admitted, the hospital received higher payments.

Beth Israel Deaconess did not admit liability or wrongdoing in the settlement, which both sides described as a way to avoid costly legal action.


But US Attorney Carmen Ortiz and Susan Waddell, special agent in charge of the Department of Health and Human Services’ Office of Inspector General, implied that the hospital may have overbilled Medicare to boost profits.

“When hospitals unnecessarily admit Medicare patients for short inpatient stays when the appropriate treatment would be outpatient or observation care, they improperly boost hospital profits at significant expense to taxpayers and patients,” Waddell said in the statement.

She said her office is “committed to uprooting such schemes’’ as part of an effort to eliminate waste in federal health care programs.

The hospital disputed that it was seeking to boost profits. Hospital attorney Jamie Katz said in an interview that Beth Israel Deaconess tried “very hard’’ to bill Medicare correctly, but that determining when patients with certain conditions should be admitted “is an incredibly subjective and difficult area with shifting standards over time. We had long discussions [with government investigators] about what we did to get things right,’’ he said.

He noted that the settlement is not a fine, penalty, or other sanction against the hospital.

A patient who is treated in the emergency room or who has a procedure such as a cardiac catheterization may need to stay in the hospital for more than several hours. Hospitals can classify the patients as “observation’’ status, which means the patient is not sick enough to be admitted but is too sick to go home. This usually involves a stay of less than 24 hours but can be longer.


If doctors decide the patient needs more intense or longer-term care, they can admit the patient to the hospital, which generally costs Medicare $5,000 more than an outpatient observation stay.

Federal officials closely examine hospitals that admit large numbers of patients for brief stays, to make sure they are medically needed and not an unnecessary cost that enhances hospital revenue, said attorneys who specialize in health care law.

“They are really cracking down,’’ said Rochelle Zapol, a partner in the health care department at Prince Lobel, a law firm in Boston that represents hospitals and nursing homes. She said the government's stern written statement about Beth Israel Deaconess “may just be a warning to hospitals’’ to be careful.

President Obama's Affordable Care Act created more stringent requirements for hospitals to report and return Medicare overpayments, she said. The government also is counting on fraud recovery to help pay for the expansion of insurance coverage.

As a result, many hospitals have reached settlements in disputes over short stays. But some have begun fighting back through the courts, and the American Hospital Association last year sued Health and Human Services for its refusal to pay hospitals for inpatient care that it determined should have been provided on an outpatient basis.


“This is a really frustrating issue for hospitals,’’ said Seattle lawyer Robert Homchick, who specializes in health care regulatory law. “The decision whether to admit a patient is supposed to be made ultimately by the physician and based on information he or she has at the time.’’

Doctors may decide the next morning that the “patient didn’t have internal bleeding after all,’’ he said, but the doctor in the emergency room is making the decision to admit “in real time.’’

Katz stressed in a written statement released by the hospital that the government’s inquiry had “absolutely nothing to do with quality of care provided to patients.’’ He said the hospital “vigorously defended claims for an inpatient level of service delivered to patients whom physicians had concluded should be admitted to the hospital because of their condition.’’

The settlement sum will come from a reserve specifically set aside for this purpose and will have no effect on hospital operations, Katz said.

The 1199SEIU United Healthcare Workers East, the largest health care union in Massachusetts, wrote a detailed letter in 2008 to Lois Silverman, then board chairwoman of Beth Israel Deaconess, about the financial risks of too many short hospital stays. The union warned that federal regulators were taking a closer look at short stays in their effort to control soaring health care costs.

The union also sent the letter to an official at the Office of the Inspector General in Boston. But it is unclear whether the union's letter led to the investigation, which began in 2010, when the government subpoenaed six years of records from the hospital. The union said its analysis of Medicare data found that 21 percent of Beth Israel Deaconess’ 67,365 discharges from 2000 through 2005 were for one-day stays, far higher than the national rate of 13 percent.


“A hospital’s prestige is never an excuse for deliberately and unnecessarily driving up costs through these types of billing schemes, ” Veronica Turner, 1199SEIU executive vice president, said in a written statement Monday.

Katz said the hospital has improved its billing practices so it can “generate claims that comport fully with the ever-changing Medicare billing rules.’’ It also created a position of senior vice president of compliance audit and risk, which reports to both its chief executive officer, Dr. Kevin Tabb, and to the board of directors.

Liz Kowalczyk can be reached at kowalczyk@globe.com.