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News Features/Series

Understanding St. Joseph's/ Candler’s Settlement of $2.7 Million with AG

Category: News Features/Series

By Lou Phelps, SBJ Staff Feb. 14, 2011 – Last week’s announcement by Georgia Attorney General Samuel S. Olens, that the State of Georgia had reached a $2.717 million civil settlement with St. Joseph’s/Candler Health System (SJCHS) relating to overpayments for Medicaid billing for inpatient and outpatient services, lacked a lot of explanation. First, the AG’s press announcement completely failed to explain that there was a significant computer error in State of Georgia’s billing system that allowed millions in over-payments to Georgia hospitals to occur from 2006 through November 2009 when a web portal was created, designed to help hospitals streamline their claim submission process. It was pulled down in Nov. 2009. And second, the AG’s public statements failed to elaborate on what they really believe has been going on by some Georgia hospitals. The announcement about millions in overpayments to St. Joseph’s/Candler is the second in the past few months, part of an investigation that is still ongoing. In the fall, the five Wellcare hospitals in Georgia agreed to pay back $2.78 million in overpayments. “This settlement (with SJCHS) follows an eleven month investigation by the Georgia Medicaid Fraud Control Unit (MFCU) and the Department of Community Health (DCH), with assistance from Myers & Stauffer, an auditing firm under contract with DCH,” according to Olens. “The settlement with St. Joseph’s/Candler Health System was for what are termed “cross-over” claims - claims made for patients who are eligible for both Medicare and Medicaid where Medicare acts as the primary coverage, and Medicaid functioning as the secondary insurance,” according to Olens. Understanding Medicare and Medicaid payments is complicated. When a hospital charges for a procedure, it bills the patient their co-pay portion, and submits the entire bill to Medicare for reimbursement. If Medicare will not pay the entire balance due, the hospital must also bill Medicaid for the remaining amount. Whatever remains unpaid for all three sources is termed “unreimbursed medical costs.” Seems clear, right? Wrong. According to Doreen Chery, St. Joseph’s/Candler’s Corporate Compliance Officer, the hospital does not submit a Medicaid claim for the amount that Medicare did not cover, it must submit the entire bill, and have the majority of the claim denied. The hospital needs the denial reports as part of its annual reporting to the State and Federal government on its uncompensated medical costs. So the total bill is submitted to both Medicare and Medicaid. The billing system Georgia was using, however, did not see many of the Medicaid payments to SJCHS, and so it paid the entire amount over the patients co-pay using Medicaid funds. And all those payments added up to $2.7 million over the three years that the State’s system was not working. Somewhere, there is a dis-connect in communications. “The investigation found that SJCHS filed claims which did not reflect the full amount of Medicare prior payments, allowing SJCHS to receive excessive Medicaid reimbursements,” according to the official press release by Olens’s office last week, ignoring the computer problem, and casting the hospital in very negative light. Willard acknowledges that there was in fact a computer glitch - that payments already made to Georgia hospitals for the Medicare portion were being erased, so Medicaid payments were also being issued. It was a small victory today for Chery to hear about Willard’s statements to the Savannah Business Journal. “They have been denying that there was a computer problem,” she said. But Willard maintains that SJCHS should have only submitted Medicaid bills for the amount allowed by Georgia, not for the full amount. The State of Georgia has a cap for every Medicaid procedure - but St. Joseph’s/Candler was ignoring this, according to Willard, “and just billing, billing, billing.” Not true, says Chery. There was no software available during that time period that allowed the hospital to estimate the allowable Georgia Medicaid cap amount, and so they just had to submit the entire bill. And, they needed the denial statements. Did St. Joseph’s realize they were double billing, and getting double payments? Did they realize that something was wrong within the system, and just take advantage of the errors? Yes, according to Chery, who says that St. Joseph’s/Candler knew something was wrong, and contacted their representative at Georgia’s Department of Community Health that oversees all payments. And, the staff kept screenshots of records they were seeing on the State’s website where they realized that small Medicare payments were not appearing, causing the State to also pay them through Medicare. For some reason, the glitch was happening with only small bills, all under $1,000, she agrees. “Given the software available at the time, there was no way for SJ/C to know that Medicaid had overpaid, in general, especially given the small dollar amount of the claims,” according to Chery. But Willard says that the hospital is just “spinning the story, to put themselves in a better light,” and said that there is no negotiated language that fully explains what the AG’s department believes was going on, limiting what he can say. But, he intimates that some Georgia hospitals knew they were receiving overpayments and just let the situation go on. St. Joseph’s/Candler’s Corporate maintains that it was not willful – that they were not double-billing, and with the amount of billing that takes place, it was impossible to assess the level of the problem. “In fact, DCH told us to resubmit the bills,” according to Scott Larson, with St. Joseph’s/Candler’s public relations department in Savannah. “When the system was shut down in November 2009, “we had to go back and resubmit – use an alternative method of getting them submitted – to get payment,” explained Chery. And, the hospital “implemented some internal processes to catch this- the duly eligible Medicare and Medicaid payments from 2006 to 2009. We were very happy to see that it was just a finite problem,” she added. The overpayments to St. Joseph’s and other hospitals and medical systems in Georgia occurred during that time period only, and were for just this one specific type of billing scenario – where both Medicare and Medicaid coverage came into play for small amounts. The claims covered in the settlement with St. Josephs’ amounted to less than 1 percent of all of SJ/C’s Medicare/Medicaid claims over a three year period of time, Chery said, and explained that no patient was affected. Individual bills for co-pays were accurate. What was involved was the hospital’s portion of federal reimbursements due. All hospitals are constantly settling up accounts with the Federal government over Medicare and Medicaid payments, Chery explained. “Many years St. Joseph’s/Candler – and many other hospitals in Georgia – are underpaid for Medicare or Medicaid claims, and go through a routine settling up between themselves and the federal government.” “Corrections to Medicaid and Medicare billing are part of the normal business cycle in the healthcare industry. It is important that the state and hospitals continually audit these complex programs to correct overpayments and underpayments,” she offered. SJCHS has denied any wrongdoing, and agreed to pay the Georgia Department of Community Health a lump sum of $2,717,370.00 to settle all possible claims related to the billing errors, as well as a minor $2,500.00 fee to defray the costs of the investigation. “While we are in total agreement that the funds should be repaid, the error in payment was outside of our control and is the same issue that has been experienced by other hospitals throughout the state. The state found no intent to defraud Medicare/Medicaid,” the hospital system added. “I think that the state initially thought there might have been the possibility of fraud when they first started looking at it. They were looking at it from one perspective and we were looking at it from another. As they looked at it, they realized that this was not fraud. They contract out their payment system and it was that contractor’s system that had the glitch in it, “ Chery believes. “I don’t have proof of what it was – the software or the web portal, but it’s what appears to be from our perspective.” The key point is that the state found no intent to defraud by St. Joseph’/Candler Hospital, concludes Chery. “This didn’t affect any patient’s personal hospital bills – the amount they were charged. There was no out-of-pocket for patients.” And, SJCHS has reserves to make that payment in full, in accordance with the agreement.

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