Banner Health pays $18M to settle false Medicare claims allegation

Phoenix’s Banner Health has agreed to pay more than $18 million to settle a whistleblower lawsuit alleging it overcharged Medicare by admitting patients at hospitals for brief, inpatient services when they could’ve been treated in less expensive outpatient settings. 

The suit dealt with alleged practices at 12 of Banner’s 28 hospitals, which the whistleblower and the U.S. Department of Justice (DOJ) said “knowingly overcharged Medicare” for what should’ve been outpatient procedures from Nov. 1, 2007, through 2016. The settlement also resolved allegations that Banner inflated the number of hours patients were in outpatient observation care in its Medicare claims.

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

The case was originally filed by former Banner employee Cecilia Guardiola. She was hired by the system as its corporate director of clinical documentation in October 2012. In a press release from the firm representing her, Kreindler & Associates, she reportedly discovered Banner’s improper billing practices when evaluating the system’s short-stay inpatient claims and identified at least 650 instances where Medicare was overcharged for what was essentially outpatient care, particularly for cardiac procedures.

She also alleged that two Banner hospitals in Sun City, Arizona, classified some cardiac procedures—including implantable defibrillators, pacemakers and stents—as urgent rather than elective in an effort to keep claims from being denied.

When she brought the practices to the attention of administrators, Guardiola said there was “an undue emphasis on revenue enhancement through inpatient admissions” rather than compliance. She resigned in December 2012 and filed the suit in November 2013.

As part of the settlement, she’ll receive $3.3 million.

“I can only hope that this settlement is the 'change agent' that allows Banner to bring its focus back to where it belongs,” Guardiola said.

In a statement to the Arizona Republic, Banner noted the settlement contains no admittance of wrongdoing of the part of the health system.

“Banner Health is fully committed to adhering to all legal and regulatory requirements and providing patients with the highest quality of care,” the statement read. “Although the rules that dictate when a hospital can accommodate a physician’s request to admit a Medicare patient are complex and evolving, our policy has always been to make those decisions in accordance with government guidelines.”