Shands hospitals to pay $26M in fraud settlement

Shands Healthcare, a nonprofit health system in Florida, has agreed to pay $26 million to settle fraud allegations, attorneys announced Monday in a report from the U.S. Department of Justice.

"We uncovered a severe lack of management oversight and a systemic failure to follow Medicare and Medicaid regulations," said whistleblower Terry Myers in a statement, who worked for Shands as an independent consultant in 2006 and 2007 to audit the health system's billing practices, according to the Orlando Sentinel.

The DOJ statement maintains Shands facilities knowingly submitted inpatient claims to Medicare, Medicaid and TRICARE for "certain services and procedures which Shands knew or should have known were correctly billable only as outpatient services or procedures."

"Allegedly, for some patients, Shands may have billed Medicare and Medicaid for short overnight inpatient admissions rather than for less expensive outpatient or observation services," Shands HealthCare CEO Timothy Goldfarb told the newspaper.

This might not be the end of Shands' troubles, either. Marlan Willbanks, Myers' attorney, said there are still outstanding allegations that the six hospitals (including Shands at Starke Hospital, Shands Alachua General Hospital, Shands Jacksonville Medical Center, Shands at Lakeshore and Shands at Live Oak) submitted fraudulent claims for outpatient services.

Whistleblowers are becoming an increasingly powerful weapon against healthcare fraud, and as predicted back in January, the industry saw more whistleblower lawsuits this year, especially as states looked to qui tam settlements to pad their tight budgets, The Wall Street Journal reported.

More than 60 percent of fraud recoveries in 2012 stemmed from qui tam provisions, according to U.S. law firm Gibson Dunn & Crutcher.

Last year, the DOJ recouped nearly $3 billion in healthcare fraud recoveries under the False Claims Act for the first time in a single year, shattering previous records by more than $1.7 billion.

To learn more:
- read the DOJ settlement
- read the Orlando Sentinel article