Hospital System Settles Medicare Fraud False Claims Act Allegations for $60 Million

The government’s announcement this week of a $60 million Medicare fraud settlement with a Missouri hospital system is yet another example of the need for ongoing deterrence of health care fraud.

According to the government, Lester E. Cox Medical Systems violated the False Claims Act, the nation’s primary tool for combating fraud against taxpayer funds. Dating back to 1995 and continuing to recent years, Cox allegedly committed various unlawful acts, including submitting fraudulent cost reports to obtain Medicare funds, entering into illegal arrangements with doctors that violated the Stark Law and the Anti-Kickback Statute, and other misconduct.

Cox reportedly will pay $35 million immediately, with five annual payments of $5 million (plus interest) to follow. Cox also has entered into a “comprehensive” Corporate Integrity Agreement with the Office of Inspector General of the United States Department of Health and Human Services, designed to cause compliance with federal requirements for receiving federal dollars.

Although the settlement amount sounds substantial, it appears that the government alleged that the Medicare program’s losses were far greater. The government says it took into account Cox’s “ability to pay” and continuation of services to the community.

I have been most impressed by the federal prosecutors I have dealt with in Missouri who investigate health care fraud cases brought under the qui tam provisions of the False Claims Act. The government’s attorneys’ work is to be applauded.

Still, from a taxpayers’ perspective, the settlement only recovers a portion of the taxpayers’ loss. As doctors and patients fight to keep scarce Medicare dollars available for patient care, we cannot tolerate fraud that reduces the funds needed by patients.

This settlement demonstrates the need for continued action any time health care fraud is detected. It was this need that motivated Congress in 1986 to create meaningful financial incentives for private citizens (relators) to bring qui tam cases under the False Claims Act, and to share in the government’s recovery of damages from those who defraud the government.