NJ physicians to face charges that they kept people as inpatients to qualify them for SNF coverage, judge rules

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A whistleblower can continue to pursue charges that a number of New Jersey physicians improperly designated Medicare beneficiaries as inpatients and sometimes prolonged their hospital stay to qualify them for skilled nursing care, a federal judge recently ruled.

The case involves a number of practice groups and physicians allegedly engaged in the practices at hospitals operated by Atlantic Health System. AHS entered into an $8.9 million settlement in 2012 with the Department of Justice and a separate settlement with other parties in 2013 and is no longer a party to the case.* The remaining physician defendants sought to have certain charges  dismissed, arguing that the legal complaint did not lay out specific enough allegations implicating them for practices at a particular hospital.

The defendants' arguments might have been persuasive in “other circumstances,” but not in this False Claims Act case, ruled Judge William J. Martini of the U.S. District Court, District of New Jersey.

“In other cases, courts have accepted, for purposes of a motion to dismiss, that a defendant violating the FCA in one location was engaging in the same conduct in another location,” he wrote in his Aug. 26 opinion.

The whistleblower contends that the physicians improperly admitted patients  as inpatient rather than for observation care to inflate their reimbursements, and that they “essentially stated” that they had full discretion to classify patients “as they pleased,” according to court documents.

Medicare auditors and providers have been at loggerheads over what constitutes a legitimate inpatient designation. The issue has led to a surge in claims denials and appeals, as well as legal cases. The nation's largest hospital organization recently reached a $98 million settlement to resolve charges that it improperly categorized people as inpatients.

Martini's opinion did not explain whether the physicians stood to financially profit from making sure patients qualified for skilled nursing coverage.

*Editor's Note: An earlier version of this article stated that Atlantic Health System is a defendant. This article has been updated based on a statement subsequently emailed to McKnight's by AHS.