506-bed Pennsylvania hospital must face overpayment suit, judge rules

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Lancaster (Pa.) General Hospital's motion to dismiss a lawsuit filed by a group of hospitals claiming it unlawfully received millions in state funding by inflating reimbursement claims was denied by a Pennsylvania federal judge Oct. 12.

Bethlehem, Pa.-based St. Luke's University Health Network and several other Pennsylvania hospitals initially filed a lawsuit in May 2018, alleging the 506-bed Lancaster General and two of its executives submitted invalid and inflated healthcare claims to the state so it would receive more money from the Tobacco Settlement Act. The money from the fund helps hospitals offset costs related to the treatment of uninsured or underinsured patients.

St. Luke's sued Lancaster General under the federal Racketeering Influenced and Corrupt Organization Act. St. Luke's claims that Lancaster General inflated claims from 2008 to 2012 and received $19.4 million from the fund during fiscal years 2008-12, from the total sum of $55.9 million that was split among 70 participating hospitals. St. Luke's and other hospitals claim the scheme caused them to lose out on reimbursement money.

The U.S. District Court for the Eastern District of Pennsylvania initially granted Lancaster General's motion to dismiss in 2019, claiming that Lancaster General's move to inflate claims didn't cause St. Luke's and other hospitals lost reimbursement money, but instead it was the state's decision to stop chasing after organizations that were overpaid.

In July 2020 an appeals court reversed that lower court decision, saying St. Luke's claims of fraud are sufficient to sue under the RICO Act. 

Lancaster General then filed an amended motion to dismiss, where they argue that the plaintiffs do not state a plausible claim for relief, as their conduct was entirely legal.

The U.S. District Court for the Eastern District of Pennsylvania on Oct. 12 has now denied the amended motion to dismiss "because plaintiffs have adequately pled a racketeering fraud scheme" that entitles them to relief. 

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