FRAUD AND ABUSE

United States v. Tenet Healthcare
Corp., No. CV04-857 GAF(JTLX) (C.D. Cal. Nov. 5, 2004)

The United States sued 26 hospitals and their corporate owner who allegedly received thousands of Medicare overpayments through the practice of “upcoding.” Upcoding involves submitting claims to Medicare for procedures that are not supported by the patients’ medical records in order to obtain a higher level of reimbursement.

The hospitals sought to have the suit dismissed, claiming that the United States was precluded from suing in federal court because the claims arose under the Medicare Act, and that Act provided a comprehensive regulatory process for resolving reimbursement issues and overpayment claims that preempts suits such as this one. The District Court for the Central District of California first found that the provision of the Medicare Act in question did not act as an absolute bar to lawsuits brought by the government and held that, regardless of that issue, in this case, the government was suing the hospitals based on the common law theories of mistake and negligent misrepresentation, rather than the Medicare Act, so the federal court was free to decide the case. According to the court, “although the Medicare regulations will determine whether the hospitals received reimbursements to which they were not entitled, the government’s complaint is based upon [the hospital’s] submission of allegedly inaccurate and inflated claims.” Therefore, the common law provides the standing and substantive basis for the claim and the Medicare Act does not apply.