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Minnesota Hospitals Pay $2.28 Million to Settle Medicare Fraud Charges Involving Kyphoplasty
Date:5/21/2009

ST. PAUL, Minn., May 21 /PRNewswire/ -- Three HealthEast hospitals in the St. Paul, Minnesota, area have agreed to pay the federal government a total of $2.28 million to settle a whistleblower ("qui tam") lawsuit alleging Medicare fraud involving a certain type of spinal surgery known as kyphoplasty.

The Minnesota hospitals are the first hospitals to settle charges stemming from a government investigation into Medicare fraud involving billing for kyphoplasty.

The whistleblower lawsuit, which the federal government joined, says the HealthEast hospitals overcharged Medicare from 2002 to 2007 by thousands of dollars each time they performed kyphoplasty, a procedure used to treat certain spinal fractures that often are due to osteoporosis.

The spinal procedure can be performed safely as outpatient surgery. But the lawsuit alleges that the hospitals performed the procedure on an inpatient basis to increase their revenues. Kyphon Inc., which sold the equipment and materials used to perform kyphoplasty, promoted the minimally invasive procedure as a moneymaker for hospitals that billed Medicare for inpatient surgery.

"By claiming these were inpatient procedures, hospitals could seek greater reimbursement from Medicare and make much larger profits on kyphoplasty," said Matthew Smith, a Washington, DC, attorney with Phillips & Cohen LLP, which represents the whistleblowers.

Medtronic Spine LLC -- Kyphon's corporate successor after Medtronic Inc. bought it -- paid $75 million last year to settle a qui tam lawsuit brought by the same whistleblowers who exposed Kyphon's sales and marketing scheme to defraud Medicare.

Numerous hospitals nationwide followed Kyphon's recommendations to increase its Medicare billings by in effect requiring kyphoplasty to be an inpatient procedure even though the procedure should have been done in almost all cases as outpatient surgery.<
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SOURCE Phillips & Cohen LLP
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