A Tacoma company that provides doctors to some 70 hospitals in 22 states has agreed to pay $14.5 million to settle an overbilling lawsuit.
Sound Physicians agreed to pay $14.5 million to end a suit originally brought by former Sound employee Craig Thomas under the federal False Claims Act, the United States Department of Justice said Wednesday. That act provides that whistle-blowers such as Thomas will share in any recovery. Thomas, former Sound Physicians’ Southwest regional manager, will receive $2.7 million of the $14.5 million settlement amount.
The suit claimed that physicians employed by Sound submitted claims to Medicare and other federal programs that exaggerated the seriousness and extent of the work they performed on patients.
In agreeing to the settlement, Sound Physicians did not admit fault.
The Justice Department in announcing the deal said the settlement “addresses allegations that, between 2004 and 2012, Sound Physicians knowingly submitted to federal health benefits programs inflated claims on behalf of its hospitalists employees for higher and more expensive levels of service than were documented by hospitalists in patient medical records.”
Hospitalists are doctors, most of whom specialize in internal medicine, who provide routine care to patients admitted to hospitals and other care facilities.
“Fraudulently inflated billing of government health care programs puts those programs at risk and impacts the system’s ability to care for the neediest in our communities,” said U.S. Attorney Jenny Durkan of Seattle. ”During this time of tight government budgets, we will do all we can to make sure everyone plays by the rules and does not run up the taxpayer tab.”
Sound Physicians said the company cooperated fully with the government after the allegations were made in the civil lawsuit.
“In agreeing to settle this case, we did not concede any liability or wrongdoing,” said Steve McCarty, the company’s general counsel. “And there was never any question regarding the high quality of care Sound Physicians deliver in more than one million patient encounters it conducts each year.”
In the original 2009 complaint, former Sound regional manager Thomas alleged that the company paid its physicians and executives based on the amount of fees they generated. That system, he claimed, was an incentive for physicians to upgrade their claims for payment to higher levels to increase their own pay.
Thomas claimed the company provided physicians little or no training in how to properly code their work when submitting forms for government reimbursement.
Sound was aware that many of its claims for reimbursement were not supported by patient medical records, the suit alleged. The company had conducted an internal audit on some of its hospitals in 2008 that discovered that upcharging, but did take any significant actions to correct it or to refund the overcollections, the suit charged.
Sound in a press release said it has implemented an enhanced compliance and ethics program. Those programs are overseen by the company’s board of directors and a vice president of compliance.
Sound will continue that program and enhanced training as part of the settlement agreement.
The settlement amounts to 1.7 percent of charges submitted to government payers during the period the government alleged upcharging happened, the company said.