Optim Healthcare, Tattnall hospital settle whistleblower suit with government, Schaengold

Aug. 14--Savannah-based Optim Healthcare and others have agreed to pay the federal government $4 million to settle allegations in a whistle blower complain that they overbilled for Medicare services.

The order, which was dated Wednesday, unsealed the 2011 complaint. It stated that Phillip Schaengold, former president/CEO at Memorial Health Inc. who prompted the complaint, will receive $39,825 from the defendants and another $760,000 from the government as part of the settlement approved by U.S. District Judge William T. Moore Jr.

The order said Moore found "the terms of the settlement to be appropriate in light of the facts of this case" but did not discuss the agreement's provisions at length.

The settlement concludes the action filed under court seal in 2011 by the government based on Schaengold's revelations against The Tattnall Hospital Co. and Orthopedic Center PC, The Orthopedic Surgery Center, both located at 210 E. DeRenne Ave., and The Doctors Hospital of Tattnall in Reidsville.

Also named were Michael Kleinpeter, CEO of the Orthopedic Center; Dr. John P. George Jr., secretary and physician leader there; and Michael Scribner, co-founder and co-owner of Strategic Health Partners at 413 E. Montgomery Crossroad.

On Schaengold's motion, Scribner was dismissed from the action, Moore's order said.

"Schaengold does not object to the

settlement agreement negotiated by the government," said Moore.

He dismissed the complaint against the remaining defendants and ordered each of them to pay their own court costs and attorneys fees.

The government's investigation was initiated when it received numerous complaints that patients, who lived in the Savannah area, had to undergo major surgical procedures at Optim Healthcare's rural hospital in Tattnall County, approximately 90 miles away, according to the U.S. Attorney's office in Savannah.

In December 2008, Optim Healthcare bought then-Tattnall Memorial Hospital and later renamed it Optim Medical Center-Tattnall. The government alleged the primary motivation in having surgeries performed at Optim Medical Centerâ€"Tattnall was financial, not based on patient need or desire.

The settlement announced Thursday resolved allegations that between 2008 and 2012, Optim Healthcare, through its physician-owned hospital in Tattnall County and through its ambulatory surgical center in Savannah, submitted claims for surgical and other medical procedures to Medicare that were: improperly inflated, misidentified in order to receive a higher rate of reimbursement, and in violation of the federal prohibition against physician self-referrals, commonly known as the Stark Law, the U.S. Attorney's office said.

The Stark Law is intended to ensure that a physician's medical judgment is not compromised by improper financial incentives and is based solely on the best interests of the patient.

The complaint contended the defendants unlawfully inflated charges at The Doctor's Hospital of Tattnall beyond any increase in costs of patient care, which resulted in improper and excessive payments from Medicare and Medicaid.

Once the plan was implemented, the defendants inflated charges and overcharged patients because their deductible and co-insurance amounts were pushed up by the inflated charges in violation of the False Claims Act, the suit contended. In addition, physicians were paid referral fees in the form of excessive compensation and incentives to refer patients to the defendant facilities, the suit alleged.

According to the suit, Kleinpeter and Scribner admitted in 2009 that after buying the Tattnall hospital they inflated all inpatient and outpatient charges.

"They simply chose an arbitrary inflation factor with no relationship to actual cost increases," the complaint said.

The complaint also alleged that before December 2008, Tattnall Memorial was a member of Memorial Health Partners Inc., a network of hospital providers, whose clients included Memorial Health Inc., Gulfstream Corp., Savannah College of Art and Design, three of Savannah's largest employers.

According to the complaint, no medical or other legitimate reason could be found for referrals to geographically remote facilities.

Schaengold "deduced that the reason for such referrals was to generate increased patient volume at Doctor's Hospital of Tattnall" which resulted in inflated reimbursements charging far more than those performed at medical facilities in Savannah, the complaint said.

Kleinpeter said Thursday that Optim "vehemently" disagrees with the allegations included in the complaint.

"The complaint was filed by the former chief executive officer of one of our competitors, who has no knowledge of our internal operations, and who stands to gain financially from the resolution of this matter," Kleinpeter said.

"In August 2012, Optim disclosed to the government documentation errors that potentially triggered technical violations of the Stark Law, and a significant portion of the settlement concerns this issue. ... Optim regrets its mistakes and in the intervening period has taken proactive compliance steps to help prevent any reoccurrence.

"The settlement also resolves a disagreement with the government concerning alleged billing errors," he said, "This is a national phenomenon, with more than 750 of these types of claims being filed across the country in the past fiscal year alone.

He said Optim decided to accept a settlement rather than deal with the legal fees and distraction a lengthy legal proceeding.

U.S. Attorney Edward Tarver said health care is not about making as much money as possible.

"Programs like Medicare operate on the honesty and decency of its providers," Tarver said, "and this office will actively pursue those who misuse the federal health care programs or their beneficiaries for financial gain."

Derrick Jackson, with the inspector general's office with the federal health and human services office in Atlanta, said the settlement indicates such actions will be aggressively investigated.

"This kind of behavior adversely affects both patient care and health care costs, and will not be tolerated," Jackson said.

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