Lengthy Vanderbilt Medical Center Medicare Billing Fraud Suit Ends in $6.5 Million Settlement

In 2013, a False Claims Act (“FCA”) complaint against Vanderbilt Medical Center (“VUMC’) was unsealed in Federal Court in Nashville, Tennessee. The complaint, originally filed by doctors-turned-whistleblowers, accused the hospital of deceptive billing practices dating back to the 1990s.

One of the plaintiff-doctors was appointed to the hospital’s compensation committee, which is how he learned of the deception. Another alleges that he was summoned to an operating room to discover an unsupervised student nurse anesthetist treating a sedated patient undergoing open-brain surgery.

Earlier this month, federal prosecutors announced the University agreed to pay $6.5 million to settle allegations of wrongdoing without incurring further criminal or civil liability.

In their complaint, the whistleblowers accused VUMC of engaging in a “scheme to maximize income from its medical practices by submitting false claims to federal and state health insurance programs for physician services that Vanderbilt knows do not meet Medicare’s billing conditions for such services.”

Filed under the qui tam provisions of the False Claims Act, three doctors, all former VUMC anesthesiologists, allege a pattern of deception from the top-ranked hospital, designed to “[cut] its costs to provide the medical services while maintaining revenue by falsifying its billing.”

Under federal law, hospitals are only permitted to bill Medicare and state insurance programs for “teaching physician services” if the teaching physician is present during the key portion of the procedure. For surgeries, the law requires the teaching doctor be present during “all critical portions” and “immediately available to furnish services during the entire procedure.”

The doctors-turned-whistleblowers allege that Vanderbilt’s “scheduling and staffing policies force surgeons to routinely overbook their schedules and rely on residents to perform the critical portions.”

The suit also claims that, oftentimes, surgeons were booked for multiple procedures simultaneously, often in geographically distant parts of the hospital. In their complaint, the doctors alleged that, “Vanderbilt’s electronic record keeping system lists back-up surgeons who are purportedly available to cover the procedures of attending surgeons during times when those surgeons have more than one ongoing operation.” “However, those covering surgeons are not actually responsible for those surgeries. Indeed, they are never in the operating suite and are frequently not even in the hospital during their scheduled coverage.”

Further, the doctors claimed that Vanderbilt routinely, “nearly 100 percent of the time,” submitted false claims for “medically directed” anesthesia despite not meeting the requirements for that increased billing rate. “Vanderbilt trains and encourages residents to prepare false post-treatment records which indicate the presence of an attending physician ICUs, when in fact such physicians are not present.”

The suit also claims that doctors who raise questions about the practice, including those who filed the suit, are “simply dismissed or removed.”

The pervasive nature of the fraud, the doctors claimed, continues because there’s no way in Vanderbilt’s billing system to document a procedure except to say it was compliant with Medicare’s requirements. For example, for post-operative anesthesia follow-ups, “physicians completing the records have no choice but to certify that they have provided care.” “Vanderbilt uses VPIMS [the hospital’s billing system] to maximize its false billing practices by taking advantage of its remote access features to schedule attending physicians to be in multiple places at once, while continuing to bill their services as if they were actually present and personally performing the services at each place,” the suit says.

As a result of their allegations and the information they provided to the government, the whistleblowers put a stop to the practice. Vanderbilt, in its settlement agreement with the government, agreed to change its billing policies and remote access program.

The settlement money will be refunded to Medicare, Tennessee health care agencies and programs, and the whistleblowers involved. Successful False Claims Act whistleblowers are statutorily entitled to 15-30% of any government recovery.

Litigating a Medicare billing based FCA case can pose its own unique challenges. Cases may involve complex statistical analysis and expert testimony. The difference between fraud and acceptable medical billing is often dependent on an intricate combination of state and federal regulations. Consulting an experienced whistleblower attorney or an attorney who specializes in the False Claims Act may help guide a potential whistleblower’s claim.

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