Hospitals that wish to participate in government health care programs must satisfy certain requirements, which are commonly referred to as “conditions of participation”.  They must also certify that they are familiar with the laws and regulations regarding the delivery of health care services, and that the services identified in the cost reports are provided in compliance with government health care programs’ laws and regulations.

In addition to paying for patient care, Medicare reimburses hospitals for additional costs related to certain things, such as overhead, capital improvements, and financing.  Hospitals submit a claim for reimbursement of these costs by filing “cost reports” at the end of each year, and base their reimbursement claims on the percentage of overall services provided to Medicare patients (as opposed to patients covered by other insurers). Thus, the amount of reimbursement is calculated as a percentage of the overall costs incurred.

Fraudulent execution of the above certification can result in False Claims Act liability for a hospital.

Examples of successful cases:

  • A Tennessee-based national health care chain agreed to pay a settlement of nearly $840 million in criminal and civil damages and penalties. Of this amount, $140 million was to resolve civil claims that the company illegally claimed non-reimbursable costs to include marketing, advertising, and purchasing costs. The company knowingly masked these costs as “community education” and “management fees.”
  • A Nebraska hospital agreed to pay $4 million to settle allegations regarding Medicare and Medicaid overpayments gained from Intensive Care and Neonatal Intensive Care services. Hospitals and health care providers are required to disclose and return overpayments from Medicare and Medicaid programs. The hospital knew about the overpayments for years, but never reported these overages.
  • A California hospital chain agreed to pay a settlement of $2.9 million because it knowingly kept overpayments made by Medicare and did not return those payments in a timely manner. The hospital knew of the overpayments but remained silent and even filed false cost reports that did not reflect the overpayments.
  • Gentiva Health Service, a large provider of home health services based in Atlanta, Georgia, agreed to pay $12.5 million to settle a False Claims Act whistleblower suit. An investigation found that Gentiva had falsified hospital cost reports in order to obtain more money from Medicare then it was entitled to. The hospital falsified the amount of its employee’s salaries and other costs of employees performing sales functions in order to increase the amount of patients coming to the provider.