Health & Medicine

St. Joseph agrees to pay $16.5 million to resolve fraud allegations

St. Joseph-London Hospital shown here at night in 2010 after the new building opened for the first time in August.
St. Joseph-London Hospital shown here at night in 2010 after the new building opened for the first time in August. LEXINGTON HERALD-LEADER

The owner of a London hospital will pay $16.5 million to settle allegations of a pervasive false billing scheme at the facility, according to documents released Tuesday.

The deal involving St. Joseph Health System Inc. is the second-largest ever in a health care fraud case in the federal Eastern District of Kentucky, which includes 67 counties.

St. Joseph-London and doctors who worked there have been accused in lawsuits of submitting bills to government-funded programs such as Medicare and Medicaid for hundreds of unnecessary heart procedures at the facility.

The government contended that doctors at St. Joseph-London performed unneeded heart catheterizations and bypass graft surgeries, and installed stents and pacemakers that were not justified by the patients' conditions.

The settlement resolves claims against St. Joseph, but not several doctors who practiced at the hospital and their clinics. It also does not exempt the doctors or St. Joseph officers or employees from criminal prosecution.

There is an ongoing criminal investigation, according to U.S. Attorney Kerry B. Harvey's office.

One doctor who performed heart procedures at St. Joseph-London, Sandesh R. Patil, pleaded guilty last year to lying about the severity of a patient's condition to make sure the government would pay for a heart procedure. Patil was sentenced to 30 months in prison.

St. Joseph repaid the government $256,000 for false claims from procedures that Patil performed in 2009 and 2010, the company said last year. The agreement released Tuesday also indicates St. Joseph might have to repay money it received based on alleged improper billing.

"We all rely on health care providers to make treatment decisions based on clinical, not financial, considerations," Harvey said in a news release. "The conduct alleged in this case violates that fundamental trust and squanders scarce public resources set aside for legitimate health care needs."

St. Joseph said in a statement that the heart doctors accused of being part of the scheme to pump up payments for themselves and the hospital no longer practice there.

The company did not admit that it violated the law. Rather, St. Joseph agreed to the deal to avoid the expense of drawn-out litigation, according to the statement.

"We are committed to providing the communities we serve with safe, high-quality health care performed with the highest of integrity," Greg Gerard, president of St. Joseph-London, said in the statement.

The hospital also agreed to a review of its procedures by the U.S. Department of Health and Human Services and increased oversight of its billing to taxpayer-funded programs.

St. Joseph Health Systems merged with Jewish Hospital and St. Mary's HealthCare in 2012 to form KentuckyOne Health, the largest health system in the state, according to its website. The alleged wrongdoing covered in Tuesday's settlement took place from January 2008 through August 2011, before the merger.

Three Lexington cardiologists played key roles in blowing the whistle on St. Joseph-London.

Drs. Michael R. Jones, Paula W. Hollingsworth and Michael Rukavina, who have a practice called Lexington Cardiology at Central Baptist Hospital in Lexington, noticed when they treated patients who had had heart procedures done in London that they had been subjected to unnecessary procedures, according to a lawsuit they filed in 2011.

One patient who came to the Lexington practice had undergone 17 heart catheterizations — performed mostly by Patil — in London in four years, none of them necessary, according to the lawsuit. Another patient had 10 catheterization procedures and seven stents placed to improve blood flow near arteries that were near normal, the lawsuit said.

The defendants in the lawsuit were St. Joseph; Sat yabrata Chatterjee; Ashwini Anand; Patil; clinics called Medical Specialities of Kentucky, Heart Clinic of Southeast Kentucky and Cumberland Clinic, owned either by Chatterjee, Anand or both; and Management Services Organization of Kentucky, which was owned by Chatterjee's wife.

The lawsuit alleged that the doctors falsified diagnoses to make it appear patients had heart problems worse than they really did. St. Joseph-London was a willing partner in the resulting false billing, putting in only a "sham" system of oversight, the lawsuit said.

The complaint also alleged that St. Joseph paid kickbacks to Chatterjee and Anand so they would send patients to the hospital, and allowed them to bill for a facility fee under the code of a St. Joseph subsidiary to get extra money for procedures the doctors actually did at their offices.

Hospitals can get reimbursements of $10,000 to $20,000 for heart procedures funded by government programs, so the alleged scheme was lucrative, according to the lawsuit.

The three Lexington doctors notified authorities of the problems and filed a lawsuit under the federal False Claims Act, which allows citizens with knowledge of fraud against the government to file a claim for the government and themselves, and share in any financial settlement.

The three doctors will receive $2,458,810 of the $16.5 million settlement, according to Harvey's office.

"This result would not be possible without the commitment of private citizens exposing this type of egregious fraud," Perry K. Turner, special agent in charge of the FBI in Kentucky, said in a statement.

The state will get about $365,000 of the $16.5 million to reimburse payments made under Medicaid.

On another front, more than 200 people have lawsuits pending in state court in Laurel County that allege doctors at St. Joseph-London performed unnecessary heart procedures on them, said Hans Poppe, their attorney.

St. Joseph is out of the civil part of the federal case now, but the government will join the whistle-blower lawsuit to try to get money from the doctors and clinics named in the lawsuit, Kerry said.

The investigation that led to the settlement was conducted by the FBI, the Kentucky Attorney General's Office, the inspector general of the federal Office of Health and Human Services, the U.S. Department of Justice and the U.S. Attorney's Office.

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