Documents unsealed in two lawsuits culminating in an $8.6 million settlement between the federal government and four hospitals illustrate what legal experts say is systemic Medicare and Medicaid fraud occurring across the Houston area.

Not a full week after four area hospitals, including Clear Lake Regional Medical Center in Webster, announced they would pay $8.6 million to settle accusations they received illegal kickbacks from ambulance companies, the U.S. Attorney’s Office announced a second settlement of $1.57 million involving the former president of the Harris County Medical Society, among others.

While the $8.6 million settlement focused on four hospitals accused of involvement in illegal ambulance kickbacks, the accusations contained in the documents didn’t stop with the medical centers.

Rather, ambulance groups operating as shell companies meant to defraud taxpayers by falsifying documents to make routine medical transports appear medically necessary, formed the majority of the accusations in the original complaint, an attorney involved in one case said.

The issue of fraudulent ambulance companies has led Congress to enact several measures meant to combat an industry that some federal officials estimate defrauds taxpayers of $50 billion a year, according to the U.S. Government Accountability Office.

While federal legal officials previously have pursued numerous small ambulance companies to combat Medicare and Medicaid fraud, the focus more recently has turned to hospitals.

“This was basically about where can I get the most bang for my buck?” attorney Mitchell Kreindler said. “You can’t pursue every allegation out there. You nip this in the bud, nail the supplier, and hopefully fix the downstream problem.”

The recently unsealed documents are telling, but they provide only a glimpse into a larger problem, as the lawsuits filed against ambulance companies and hospitals are frequently left under seal for years, experts say.

Kreindler was an attorney representing two whistleblowers in one of the two 2011 qui tam lawsuits filed in the U.S. District Court Southern District of Texas, mostly against several area ambulance companies.

Qui Tam False Claims Act lawsuits are filed by private parties acting in the government’s interest and they are initially sealed from public disclosure so federal officials can review the cases and decide whether to intervene, Kreindler said.

Eventually, the U.S. Attorney’s Office joined the complaining parties in the two lawsuits to create a case that culminated in the four area hospitals agreeing to pay $8.6 million to settle the claims. The settlements were not admissions of guilt by the hospitals, federal officials said.

The settlement was only the second of its kind against medical institutions in the area and the nation, the U.S. Attorney’s Office officials said.

A Galveston nursing home operator in 2015 reached a $3.2 million settlement over similar allegations, officials said.

“The media has really exposed ambulance companies in Houston committing fraud as a big deal,” Kreindler said. “Medicare officials have started cracking down on things on the administrative end. They’re squeezing the fire hose to stop those type of fraud claims.

“This particular case is deciding not to go after the gazillion little ambulance companies and trying to prove medical necessity.”

U.S. Attorney’s Office officials Wednesday announced that the former president of the Harris County Medical Society and several related facilities would pay $1.57 million to settle similar claims about Medicare fraud.

Houston was once home to more ambulance companies per capita than most states, but those numbers have decreased as federal officials have increased the number of Medicare fraud cases brought against them, Kreindler said.

The accusations contained in Kreindler’s lawsuit, as well as the other 2011 suit, accused several area ambulance companies as acting as shell companies and committing billing fraud, records show.

Medicare and Medicaid both require transportation to be “medically necessary” to qualify for reimbursement, and require prior documentation to show the need, the lawsuit asserts.

The lawsuits accused the ambulance companies of operating a fraud scheme to receive lucrative Medicare and Medicaid payments by falsely claiming ambulance rides as medically necessary, when they weren’t, according to documents recently unsealed in the lawsuit.

The different companies, all owned by the same couple, committed fraud by making false reports and physician statements to their billing departments that they then submitted to Medicare, the lawsuit asserts.

Managers, working under corporate directive, would require employees rewrite run sheets if they showed that a transport was not medically necessary to make it appear the patient’s medical condition was much worse, the lawsuit asserts.

The lawsuits against the ambulance companies ultimately were dismissed. The Daily News has not named the ambulance companies because of that dismissal and because the sealed case files make confirmation of the accusations impossible.

Kreindler, however, said the dismissals came because federal law enforcement officials refocused the case to target the hospitals, not because accusations against the companies were false.

“Those are difficult cases,” Kreindler said. “They’ll get documents signed by doctors and say they were medically necessary. You’re almost proving them on a claim-by-claim analysis.”

The hope is that if hospitals start cracking down on Medicare fraud, the problem will go away, Kreindler said.

Federal officials last week said investigations might continue.

“This office will continue to investigate alleged ambulance swapping and alleged violations of the Anti-Kickback Statute, and it is important to emphasize that both sides of the relationship — both the ambulance companies and the facilities they serve — can be held responsible for improper actions,” said Angela Dodge, spokeswoman for the U.S. Attorney’s Office.

The claims resolved by the settlement were allegations, with no determination of liability on the part of the hospitals, prosecutors said.

U.S. Attorney’s Office officials declined to say more.

Matt deGrood: 409-683-5230; matt.degrood@galvnews.com

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(2) comments

PD Hyatt

People who were responsible for this, should spend time in prison.... If I had defrauded the government for that kind of money I would be in jail....

Tim Thompson

Sorry, just can’t resist, people are always complaining about the Feds, the big, bloated Federal Gov’t, wasting taxpayer’s money, meddling in private citizens affairs, too much regulation, etc. Well as this article clearly shows private citizens & companies sometimes do bad things, like try to defraud the Gov’t and basically steal taxpayer’s money, so who’s going to police all this if we strip the Fed down to a bare minimum? There’s a REASON we have the FDA, and the EPA, and the Justice Dept! I say good job, Feds, keep up the good work!

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