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Federal Lawsuit Highlights Problems With Medicare Payment

According to reports, a lawsuit filed in Dallas, Texas against one of the nation’s biggest hospice companies highlights how Medicare’s payment methods can offer unintended financial incentives to wrongfully move patients from HMOs into hospice programs and then into hospitals.

In a complaint filed in federal court, a former general manager of Vitas HealthCare Corp.’s San Antonio office alleged the company defrauded Medicare through a “conspiracy” with two HMO companies. Reportedly, Vitas and the companies have denied the allegations. Further sources say the Department of Justice and the state of Texas have declined to join with the plaintiffs in the suit “at this time.”

According to the complaint, because Medicare Advantage pays HMOs monthly per-patient fees, the HMOs had a financial incentive to avoid chronically ill patients, who need lots of treatments. Accordingly, the complaint alleges the HMOs referred many of their chronically ill patients for hospice care at Vitas, which accepted them even though their conditions weren’t considered terminal.
According to the complaint, although expensive for the HMOs, these patients made money for Vitas because Medicare reimburses hospice with a flat fee for each day a patient is enrolled. According to a congressional panel known as the Medicare Payment Advisory Commission, this means long-stay hospice patients tend to be more profitable since the big costs in hospice care come when patients first enter the program and need to be evaluated and at the end, when they are dying and require more care. Sources say that the Medicare Payment Advisory Commission has publically faulted Medicare’s pay formula.

According to the lawyer for the Vitas whistle blower, Medicare lost out because the patients did not qualify for hospice and because the hospice benefit paid Vitas at a higher rate than it paid the HMOs. Further, the lawsuit claims that when the health of Vitas patients required expensive hospital services, the company kicked them out of the hospice program “in order to shift the high costs of hospital procedures and prescription medications” away from the hospice and onto Medicare’s traditional fee-for-service program. The lawsuit also alleges Vitas at times backdated the revocation papers.

According to Vitas’ whistle blower, when he became general manager of Vitas’ San Antonio office in 2008, he discovered that 22 percent of the 560 hospice patients had been enrolled for more than 500 days. Reportedly, the Medicare benefit is intended for patients who are projected to have no more than 180 days to live, although government watchdogs have been concerned that for-profit hospice companies are seeking out patients who aren’t on death’s door.

The whistle blower claims he discovered that the medical director for Vitas’ local office simultaneously worked as a medical director and doctor for the two HMOs, WellMed Medical Management Group, based in San Antonio, and Care Level Management, run by Inspiris, a Tennessee company. Accordingly, the medical director was in a position to refer the chronically ill HMO patients to Vitas and to then certify them as meeting Medicare’s hospice rules. The lawsuit says the medical director executed the plan with a former general manager of Vitas’ San Antonio office who is now an executive at Inspiris.

Reportedly, the lawsuit was filed in 2009 under seal, which was partially lifted this week by Jane Boyle, a judge in the United States District Court’s Northern District of Texas, based in Dallas. Sources say under the rules of whistleblower “qui tam” lawsuits, the Vitas’ whistle blower would be entitled to a portion of any money the lawsuit recovers on the government’s behalf. Reportedly, the lawsuit does not state how much money was involved.

Sources say that Vitas denied the allegations but declined to comment on the specifics. According to Vitas CEO Timothy O’Toole, “Vitas is in compliance with all Medicare and Medicaid rules and regulations applicable to hospice providers.”

According to the lawsuit, Vitas’ San Antonio branch became more vigilant about removing from its rolls patients who had been remaining for long periods after the Centers for Medicare and Medicaid launched a close review in 2007. But according to the lawsuit, in late 2008, a Vitas executive conducting a review of patient charts told the whistle blower that many of the patients currently on the rolls “were never eligible and that he [the executive] did not know why they were ever admitted.”