Shore Health pays $9.5 million settlement after alleged Medicare, Medicaid overpayments

University of Maryland Shore Regional Health has returned nearly $9.5 million after a federal lawsuit alleged the provider overcharged Medicare and Medicaid from 2014 to 2018.

EASTON — Following a lengthy federal lawsuit, University of Maryland Shore Regional Health returned nearly $9.5 million in overpayments to Medicare and Maryland Medicaid to resolve alleged False Claims Act violations in June.

The civil lawsuit was originally filed in July 2016 after a whistleblower brought forward claims that UM Shore Regional Health allegedly overcharged Medicare and Maryland Medicaid programs between 2014 and 2018 for services provided to their beneficiaries. The federal False Claims Act and its state equivalents allow private citizens like the whistleblower to file lawsuits on behalf of the government for false or fraudulent payment claims under government programs.

UM Shore Regional Health, which runs two hospitals and several outpatient centers on the Eastern Shore, is a part of the larger University of Maryland Medical System. The health system provides many services to patients covered with Medicare or Medicaid across the Eastern Shore.

“The University of Maryland Shore Regional Health is committed to ensuring its billing practices comply with federal and state requirements. UM SRH voluntarily repaid $9.5 million to the federal and state governments, as well as legal fees and other costs associated with the matter,” Trena Williamson, the regional director for communications and marketing for UM Shore Regional Health, said in a statement on the settlement.

The original complaint alleged that since June 2014, UM Shore Regional Health had been improperly billing Medicare for outpatient services provided at unregulated facilities by using a provider transaction access number (PTAN) — a Medicare-assigned number to authenticate a provider — designated for use by a regulated facility.

It’s the Maryland Health Services Cost Review Commission (HSCRC), not the health care marketplace and system, that sets the amount that Medicare pays and the reimbursement rates for inpatient and outpatient services for its beneficiaries at regulated state hospitals or health care facilities.

However, the HSCRC does not set rates for services provided at unregulated facilities — outpatient centers off of a regulated facility’s campus. Instead, Medicare pays for these services in accordance with its own unique payment system.

The reimbursement rates for outpatient services set by the HSCRC are generally much higher than the rates under Medicare’s normal payment system. Maryland hospitals tend to receive a higher reimbursement from Medicare when outpatient services are provided at regulated facilities.

The whistleblower also claimed that UM Shore Regional Health directed Medicare to process the incorrectly billed claims instead of using the appropriate PTAN for the unregulated facility, causing the overpayments for various services. Medicare’s overpayments to UM Shore Regional Health ranged from just a few dollars to over $1,000.

According to the complaint, multiple employees internally reported that UM Shore Regional Health was using the incorrect PTAN and receiving overpayments from Medicare for outpatient services. UM Shore Regional Health continued to bill under the wrong number and did not refund the overpayments to Medicare, according to the complaint.

The Maryland U.S. Attorney’s Office and the State of Maryland reached the $9.5 million settlement with UM Shore Regional Health in June 2021, which UM Shore Regional Health voluntarily paid. The hospital and health care system did not admit liability for the over-billing in the settlement.

“Costs for healthcare services are subject to incredibly complex regulation by both state and federal agencies, and fees for many procedures can vary depending on the site where a service is delivered. This repayment stems from a dispute over the appropriate rates for certain healthcare services provided outside of a hospital between 2014 and 2018. This was a resolution of billing errors which stemmed from confusion over the applicable regulatory requirements for certain payments; this repayment does not reflect any multiplier or penalties because there was no evidence of fraudulent conduct or intent,” the statement from Williamson reads.

The whistleblower was represented by the Whistleblower/False Claims Act practice group of Cohen Milstein Sellers and Toll, a national firm handling plaintiff class action lawsuits and litigation.

Casey Preston, an attorney with the firm and co-lead counsel for the plaintiff, described the whistleblower as “a person of strong integrity” for coming forward with the claims.

“We thank the District of Maryland’s U.S. Attorney’s Office and the Maryland Attorney General’s Office for their diligent and thorough investigation of our client’s allegations and for protecting taxpayers and government health care programs by recovering the substantial overpayments,” he said.

The case wouldn’t have been possible without the “brave individual” reporting the improper billing practice to the government, said Gary Azorsky, an attorney with Cohen Milstein Sellers and Toll and co-lead counsel for the plaintiff.

“This settlement is a reminder about the important role that whistleblowers play in identifying and rooting out fraud in the healthcare industry,” Azorsky said.

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