Whistle-blower claims 2 NC hospitals bilked Medicare for millions; government bows out of lawsuit

A newly unsealed whistle-blower lawsuit alleges two major hospitals in North Carolina artificially inflated their expenses to fraudulently obtain tens of millions of dollars from Medicare and Medicaid, according to a Charlotte Observer report.

The lawsuit alleges Charlotte, N.C.-based Carolinas Medical Center and N.C. Baptist Hospital in Winston-Salem overstated their costs by using MedCost, a company owned by CMC's parent company Carolinas HealthCare System and N.C. Baptist Hospital, to provide health benefits to their employees.

The lawsuit specifically alleges that the healthcare organizations inflated their benefit expenses. That allowed the hospitals to collect additional Medicare reimbursement based on a wage index that permits hospitals with high employee costs to get more reimbursement, according to the report.

There are measures in place to prevent overpayments based on the wage index, such as requiring hospitals to report if any portion of their employee benefits costs were paid to an organization they own or control. However, the lawsuit claims CMC and N.C. Baptist did not disclose that they owned MedCost, according to the report.

The lawsuit further alleges that employees of the two hospitals were harmed by the alleged scheme, as they were overcharged for their healthcare benefits.

Joe Vincoli, a former manager at N.C. Baptist, originally brought the lawsuit under the qui tam, or whistle-blower, provision of the False Claims Act in 2009. Mr. Vincoli served as N.C. Baptist's director of managed care in 2006 and 2007. Mr. Vincoli will move forward with the case on his own, as the Department of Justice declined to join the case.

Carolinas HealthCare System declined to comment on the pending lawsuit, but Wake Forest Baptist Medical Center, which includes N.C. Baptist, issued a statement to the Charlotte Observer disputing the claims.

"We fully cooperated with the government in its thorough investigation into the allegations and provided substantial documentation and information. We never believed the allegations had any validity and we are pleased that the government has declined to intervene in the matter," the statement said.

This isn't the first time N.C. Baptist has been hit with a lawsuit about MedCost. In 2009, N.C. Baptist's employees sued the hospital, claiming MedCost was not serving their best interest. The employees alleged that N.C. Baptist had chosen MedCost because the hospital wanted its employees in a preferred provider organization that wouldn't try to drive down the treatment costs employees pay at the hospital. N.C. Baptist agreed to pay nearly $5.4 million to settle that lawsuit, according to the report.

This also isn't the first time Carolinas HealthCare System has been confronted with the issue. In 2010, Mr. Vincoli filed a complaint with the U.S. Department of Labor, questioning whether the system's ownership and use of MedCost violated the federal Employee Retirement Income Security Act. The health system has argued it's not governed by ERISA because it is excluded as a governmental employer. The Department of Labor investigation remains open, according to the report.

More articles on healthcare industry lawsuits:

Nurse files whistle-blower lawsuit, alleges fraud at Kansas hospital
California physician faces murder trial for deaths of 3 patients
Florida hospital hits Health First with antitrust lawsuit for trying to monopolize cancer care market

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