Hospital settles pharmacy false claims for $4.3 million
In an unusual case, an Atlanta hospital has just paid $4.3 million to settle a whistle blower suit. Craig Heyrman, the former pharmacy manager for Grady Memorial Hospital, claims the hospital overcharged the Georgia Medicaid program for prescriptions. He collected $779,000 for blowing the whistle.
As a nonprofit provider, Grady was supposed to bill Medicaid for the actual acquisition cost of the drug, plus the statutory dispensing fee, according to the suit. But between 1984 and 1994, Grady charged a usual and customary dispensing fee on top of the statutory fee.
Between July 1992 and December 1994, for example, Grady billed a $7.50 usual and customary fee on top of the $4.11 statutory dispensing fee, Heyrman says. That resulted in $3.3 million in overcharges on 450,000 claims during that period, according to the suit. The problem began when Grady installed a computerized billing system in 1984, Heyrman says.
Not surprisingly, the hospital has a different story. "It was a computer glitch," says hospital attorney Alan Rosenberg. A programming error added the second prescription fee, says Rosenberg, who argues the settlement was light given that it covered 10 years worth of claims. "It was essentially a payback of an overpayment plus interest," he adds.
Grady was confused by unclear Medicaid rules, says William Mitchelson, an attorney at Atlanta-based Alston and Bird, which represented the hospital. Grady had unsuccessfully sought guidance from Georgia Medicaid, and had billed according to what it thought the state wanted. Mitchelson says Grady already was discussing the billing problem with Medicaid before Heyrman filed his suit.
Rosenberg also questions Heyrman’s role in the affair. "He was the director of pharmacy reimbursement," Rosenberg says. "He signed off on the claims."
Heyrman argued that he had repeatedly warned the hospital of the overcharging. Grady did not admit any wrongdoing in the settlement.
During the period of the overcharges, Grady had "pieces of a compliance plan," Rosenberg says. Like many providers, Grady is now in the midst of creating a formal compliance plan. And that should be a lesson for all providers to create a compliance plan, Rosenberg warns. "It’s like having a risk management system."
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