Insurance Fraud By Hospitals Prosecutions
1. United States v. HealthSouth Corporation (2003–2006)
Facts:
HealthSouth, one of the largest healthcare providers in the U.S., was accused of systematically inflating patient charges and falsifying patient records to receive higher reimbursements from Medicare and private insurance companies.
Executives instructed staff to overstate patient diagnoses and treatments, resulting in billions in fraudulent claims.
Charges:
False Claims Act (FCA) violations for submitting fraudulent bills.
Wire fraud and bank fraud, since insurance payments were processed electronically.
Outcome:
HealthSouth agreed to pay $325 million in civil settlements.
CEO Richard Scrushy was criminally charged; he was acquitted of criminal charges in 2006, but many other executives pled guilty.
Impact:
Highlighted large-scale hospital billing fraud and the need for internal auditing and compliance programs.
2. United States v. Tenet Healthcare Corporation (2006)
Facts:
Tenet Healthcare was accused of inflating surgical procedure bills and misreporting patient diagnoses at multiple hospitals to maximize reimbursement from Medicare and Medicaid.
Practices included performing unnecessary procedures and double-billing.
Charges:
FCA violations for fraudulent claims.
Kickback and anti-trust violations in some subsidiary hospitals.
Outcome:
Tenet paid $900 million in total fines and settlements, including $513 million for civil claims and $98 million in criminal penalties.
Several hospital administrators faced individual fines and probation.
Impact:
Reinforced that corporate liability extends to hospital networks.
Demonstrated DOJ’s focus on systemic billing fraud across multiple facilities.
3. United States v. Hahnemann University Hospital (2008)
Facts:
Hahnemann University Hospital in Philadelphia submitted false claims to Medicare by exaggerating the level of patient care provided.
They also billed for services not rendered or unnecessary procedures recommended to maximize reimbursement.
Charges:
FCA violations.
Healthcare fraud under 18 U.S.C. § 1347.
Outcome:
Hospital paid $25 million in settlements to federal and state governments.
Several billing staff were criminally prosecuted, receiving probation and fines.
Impact:
Showed that even academic hospitals are susceptible to overbilling fraud.
Emphasized importance of accurate documentation and compliance audits.
4. United States v. St. Joseph Health System (2012)
Facts:
St. Joseph Health System was accused of upcoding patient diagnoses, meaning hospital coders assigned higher-paying diagnosis codes than medically justified.
This resulted in millions in excess insurance payments.
Charges:
FCA violations.
Healthcare fraud and misrepresentation of patient care.
Outcome:
St. Joseph paid $13.5 million in settlement.
No executives were criminally prosecuted, but strict compliance programs were mandated.
Impact:
Reinforced DOJ’s enforcement focus on upcoding and documentation fraud.
Set a precedent for monitoring coding practices in hospitals.
5. United States v. Daughters of Charity Health System / Seton Medical Center (2009)
Facts:
The hospital network was accused of fraudulently billing Medicare and Medicaid for services not provided and misrepresenting patient diagnoses.
Internal audits revealed patterns of overbilling and unnecessary procedures.
Charges:
FCA violations.
Wire fraud and conspiracy to commit healthcare fraud.
Outcome:
Paid $10 million in civil settlements.
Hospital management implemented new compliance oversight as part of the settlement.
Impact:
Highlighted how fraudulent billing practices often arise from systemic administrative issues.
Emphasized accountability at both corporate and departmental levels.
6. United States v. Tenet Healthcare / Redding Medical Center (2009)
Facts:
Redding Medical Center, part of Tenet Healthcare, falsely reported patient ICU stays and submitted claims for high-level care not provided.
This led to inflated Medicare and private insurance payments.
Charges:
FCA violations.
Healthcare fraud under 18 U.S.C. § 1347.
Outcome:
Paid $18 million in civil settlements.
Individual hospital administrators faced fines and probation.
Impact:
Demonstrated DOJ’s scrutiny of ICU billing and high-reimbursement hospital services.
Encouraged hospitals to adopt real-time monitoring systems for claims.
Key Legal Takeaways:
False Claims Act (FCA) is the primary tool for prosecuting hospitals for insurance fraud.
Healthcare fraud under 18 U.S.C. § 1347 criminalizes knowingly submitting fraudulent claims to federal healthcare programs.
Upcoding, unnecessary procedures, and billing for non-existent services are the most common forms of hospital insurance fraud.
Corporate liability is emphasized; settlements often reach hundreds of millions of dollars.
Individual executives may face criminal prosecution, but most cases focus on corporate settlements and compliance programs.
Summary Table
| Case | Year | Defendant | Allegation | Outcome |
|---|---|---|---|---|
| HealthSouth Corp | 2003–2006 | HealthSouth | Inflated charges, falsified records | $325M settlement |
| Tenet Healthcare | 2006 | Tenet | Inflated surgical bills, unnecessary procedures | $900M settlement |
| Hahnemann University Hospital | 2008 | Hahnemann | False claims, unnecessary procedures | $25M settlement |
| St. Joseph Health System | 2012 | St. Joseph | Upcoding, inflated reimbursements | $13.5M settlement |
| Daughters of Charity / Seton Medical Center | 2009 | Seton | False claims, misrepresented diagnoses | $10M settlement |
| Tenet / Redding Medical Center | 2009 | Redding Medical Center | False ICU claims | $18M settlement |
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