504 hospitals hit with whistle-blower lawsuit alleging false claims violations

Jacksonville, Fla.-based Healogics, which operates wound care centers across the U.S., and 504 hospitals across the country — including hospitals from systems such as Cleveland Clinic, St. Louis-based Ascension Health and Dallas-based Tenet Healthcare — have been accused of defrauding Medicare, Medicaid and Tricare, among others, according to a whistle-blower lawsuit filed by three former employees of Healogics in federal court.

Healogics is the nation's largest for-profit provider of wound care services and has partnered with more than 600 hospitals throughout the U.S. to operate wound care centers. In their complaint, the whistle-blowers allege Healogics' fraud scheme was carried out with the "consent and cooperation" of the hospitals named as defendants in the lawsuit.

The whistle-blowers' allegations
The lawsuit specifically claims that a document known as a "superbill" was placed into in each patient's chart at the wound centers prior to any patient interaction. The superbill lists all procedures and corresponding CPT codes. "At the end of the patient visit the attending nurse and/or the treating physician would check off the procedures that were allegedly, but were in many instances not, done," the complaint reads. A similar process was used in order to submit claims for the physician's fee for procedures performed.

The lawsuit further alleges that each defendant hospital received a budget from Healogics, showing how much money the wound centers would make each month. The budget was allegedly built on the premise that certain benchmarks set by Healogics could appropriately be met.

"Healogics' benchmarks were more than mere targets that each wound care center should strive towards; rather they were structured corporate mandates that blatantly disregarded whether or not patients being treated in the centers actually needed the more expensive treatments or ever actually received it," the complaint states.

There were allegedly negative consequences for physicians who failed to meet the benchmarks. These physicians were pressured and harassed by Healogics and their hospitals until they conformed or were pushed out, according to the lawsuit.

Conforming required upcoding debridement procedures, falsifying eligibility in order to bill for unnecessary but expensive hyperbaric oxygen treatments and requiring all patients to undergo unnecessary testing called transcutaneous oxygen measurement, according to the complaint.

"The scheme was carried out by the defendants with an 'everyone wins' explanation wherein patients received otherwise expensive treatments for little to no cost, doctors were able to bill extensively and grow wealthy, defendant hospitals improved their bottom line and Healogics' revenue and corporate valuation exploded. The downside to this reasoning is that the insurers, notably the government insurance programs, were left holding the bag," the complaint reads.

The lawsuit, which was filed under seal in June 2014, was unsealed earlier this month. On March 26, the court indicated the government must make its intervention decision on or before the end of September. On Sept. 30, the federal government notified the court it was not intervening in the case at that time. However, the government said it had not completed its investigation.

Benjamin A. Van Raalte, MD, Michael J. Cascio, MD, and John Murtaugh — all former Healogics employees — brought the action.

A second lawsuit
In a separate federal action, Willie Arnold and Michelle Arnold, both former Healogics employees, claim that more than half the hyperbaric treatments the company billed to Medicare were fraudulent. That lawsuit was originally filed in July 2014 and also recently unsealed.

The two whistle-blowers allege Healogics engaged in three separate schemes to "wrongfully enrich itself at taxpayers' expense."

The first scheme involves bypassing Medicare's requirement for certain diagnostic test results before performing hyperbaric treatments on injuries below the knee. The whistle-blowers claim that if the results of a patient's transcutaneous oxygen measurement reflect that the patient does not meet Medicare's requirements for treatment, Healogics hides the results and lies to Medicare about the reasons why hyperbaric treatment is necessary.

The second scheme involves Healogics pressuring physicians to perform unnecessary hyperbaric treatments on patients being treated for bone infections.

The third scheme involves Healogics instructing physicians to bill Medicare for instances of debridement that do not meet Medicare guidelines.

Healogics says the lawsuits are meritless
When asked about the pending litigation, a Healogics spokesperson told Becker's the allegations in the lawsuits go against the company's values.

"Providing the best wound healing care is Healogics' top priority and our innovative treatments have helped countless patients. We have programs in place to ensure that our practices conform to applicable regulations and the conduct alleged would be inconsistent with Healogics' core values and culture," the spokesperson says. "We don't believe that these lawsuits have any merit and we intend to defend ourselves vigorously."

More articles on healthcare industry lawsuits:

ACLU hits Trinity Health with lawsuit alleging EMTALA violations
Ex-Erlanger executive gets $600k in wrongful termination settlement
Nevada agrees to pay $400k to settle patient dumping allegations


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