Healthcare Revenue Cycle Management, ICD-10, Claims Reimbursement, Medicare, Medicaid

Policy & Regulation News

Banner Health Pays $18M to Resolve Medicare Fraud Accusations

A whistleblower lawsuit alleged Banner Health engaged in a Medicare fraud scheme that billed for inpatient services that could have been performed in the less costly outpatient setting.

Medicare fraud, False Claims Act, and Banner Health

Source: Thinkstock

By Jacqueline LaPointe

- Banner Health, one of the largest non-profit hospital systems in the country, recently agreed to pay $18 million to the federal government to resolve Medicare fraud allegations involving 12 of its hospitals in Arizona and Colorado, the Department of Justice (DoJ) reported.

The Arizona-based system operates 28 acute care hospitals in six states and reports over $24.3 billion in total patient revenue, of which almost $13 billion is total inpatient revenue and $11.4 billion is outpatient revenue, according to data from Definitive Healthcare.

The federal government recently alleged that the large hospital system violated the False Claims Act after a former employee came forward with accusations that some of Banner Health’s hospitals knowingly submitted false claims to Medicare from Nov. 1, 2007, to Dec. 31, 2016. The false claims involved admitting patients to the hospital who could have been treated in the lower-cost outpatient setting.

Banner Health then allegedly billed Medicare for short-stay, inpatient procedures that should have been billed as less costly outpatient procedures. The healthcare fraud scheme resulted in the hospital system intentionally overcharging Medicare patients, according to the DoJ.

Performing procedures in the inpatient versus outpatient setting costs significantly more. The HHS Office of the Inspector General (OIG) reported in 2016 that Medicare paid three times more for a short inpatient stay than a short outpatient stay. For example, Medicare reimbursement for a coronary stent insertion was $13,269 when performed during an inpatient stay versus just $8,364 during an outpatient stay.

While hospitals received greater reimbursement checks from Medicare for inpatient procedures, beneficiaries ended up paying about two times more for the services, OIG added.

Additionally, the whistleblower alleged that Banner Health inflated the number of hours for which patients received outpatient observation care in reports to Medicare during the same period. Observation status is paid at the outpatient rate despite patients residing in hospital beds and receiving similar care as an inpatient.

“Hospitals that bill Medicare for more expensive services than are necessary will be held accountable,” stated Christian J. Schrank, Special Agent in Charge for the HHS Office of Inspector General.  “Medical decisions should be made based on patients’ conditions and needs, not on providers’ profits.”

In addition to the $18 million settlement to resolve the Medicare fraud allegations, Banner Health also entered into a corporate integrity agreement with the HHS OIG. The agreement requires the hospital system to “engage in significant compliance efforts” over the next five years.

Banner Health must also retain an independent review organization to assess the accuracy of federal healthcare program claims.

“Taxpayers should not bear the burden of inpatient services that patients do not need,” said Chad A. Readler, Acting Assistant Attorney General for the Justice Department’s Civil Division.  “The Department will continue its efforts to stop abuses of the nation’s healthcare resources and to ensure that patients receive the most appropriate care.”

On top of the recent Medicare fraud allegations, Banner Health also recently found itself under investigation for a 2016 healthcare data breach. A cybersecurity attack on July 13, 2016, potentially exposed personal and/or protected health information of 3.7 million patients, beneficiaries, providers, and food and beverage outlet customers.

Hackers reportedly gained access to Banner Health’s payment processing system at food and beverage outlets. They then accessed other servers containing patient data.

The Office of Civil Rights is investigating the healthcare data breach, according to an Ernst & Young year-end financial report. The hospital system could face potential fines as a result of the investigation.


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