Chicago hospital defeats allegations of 'ghost payroll' scheme

An Illinois federal court has dismissed a whistleblower lawsuit alleging University of Chicago Medical Center, Medical Business Office and Trustmark Recovery Services violated the False Claims Act, according to Bloomberg Law

MBO and Trustmark provided medical billing and debt collection services for UCMC. The whistleblowers, Kenya Sibley, Jasmeka Collins and Jessica Lopez, alleged MBO and Trustmark engaged in a "ghost payroll" scheme that involved regularly falsifying UCMC invoices, listing employes who didn't work on the hospital's collections and time charges from people who were not employees. 

The whistleblowers, former employees of MBO and Trademark, alleged the companies and UCMC knew about the "ghost payroll" scheme, and that the allegedly falsified invoices caused the hospital to report overstated wages to the federal government, triggering a larger Medicare reimbursement than it was entitled to. 

The complaint further alleged that MBO and Trustmark engaged in a "bad debt" scheme. "MBO would regularly write-off Medicare bad debts for amounts a Medicare beneficiary owed without conducting a reasonable collection effort, when Medicare beneficiaries were still paying on the debts, or when Medicare beneficiaries did not actually owe a debt," the amended complaint states. 

After writing off the bad debt, MBO would allegedly send the bad debt to Trustmark or another collection agency for further collection efforts. 

On Sept. 14, Judge Harry Leinenweber of the U.S. District Court for the Northern District of Illinois dismissed the amended complaint, saying the whistleblowers failed to adequately allege the defendants engaged in a scheme to inflate bad debts and falsify invoices in University of Chicago's cost reports. 

The allegations of a "ghost payroll" scheme fail because the whistleblowers failed to allege that defendants certified compliance with any regulation, which is required when filing a false claims case, the judge said in the decision. The amended complaint also fails to establish sufficiently UCMC's knowledge of the alleged scheme. 

The judge also ruled that the amended complaint failed to adequately allege a "bad debt" scheme. Allegations related to MBO's and Trustmark's bad debt reports to clients cannot satisfy the requirements to show that companies or their clients submitted improper claims for bad debt reimbursements to the government, reads the decision. 

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