Providence Reaches $22.7M Settlement to Resolve Healthcare Fraud

Providence Health & Services Washington (Providence) has reached a $22.7 million settlement to resolve healthcare fraud allegations that it falsely billed Medicare and Medicaid for medically unnecessary neurosurgery procedures.

The settlement between Providence, the US Department of Justice (DOJ), and the state of Washington marks the largest healthcare fraud settlement in the Eastern District of Washington.

Providence operates 51 hospitals in seven states, including Providence St. Mary’s Medical Center in Walla Walla, Washington. The settlement centers around two neurosurgeons employed at Providence St. Mary’s between 2013 and 2018, identified as Dr. A and Dr. B in the case.

The health system paid neurosurgeons based on a productivity metric that incentivized them to perform more complex surgical procedures. Providence paid Dr. A between $2.5 million and $2.9 million a year from 2014 to 2017 based on this productivity metric, according to the case.

The settlement resolves allegations that Providence billed Medicare, Washington State Medicaid, and other federal healthcare programs for medically unnecessary neurosurgery procedures that Dr. A and Dr. B performed.

The health system admitted that Providence St. Mary’s medical personnel had expressed concerns about the doctors. Personnel stated that the doctors were endangering the safety of patients, creating an excessive level of complications and adverse outcomes through their surgeries, performing surgeries on candidates who were not appropriate for surgery, and failing to correctly document procedures and outcomes.

Additionally, Providence said that medical personnel had voiced concerns about Dr. A completing medical documentation with falsified and exaggerated diagnoses to receive reimbursement from health plans and performing surgeries that did not meet Medicare’s medical necessity requirements. Personnel had also said Dr. A performed an excessive number of unnecessarily complex surgeries, which jeopardized patient safety.

“Ensuring that surgical procedures are medically appropriate and properly performed is critical to building safe and strong communities here in the Eastern District of Washington,” Vanessa Waldref, US Attorney for the Eastern District of Washington, said in the press release.

“Patients with back pain and spinal injury deserve top-notch care from a provider who puts the patient first and is not improperly influenced by how much he can bill for the procedure,” Waldref added. “Providence’s failure to ensure that Dr. A and Dr. B were performing safe and medically appropriate surgery procedures, despite repeated warnings, put patients’ lives and safety at serious risk.”

Finally, Providence admitted that despite placing the doctors on administrative leave, the health system allowed both doctors to resign while on leave and did not report them to the National Practitioner Data Bank or the Washington State Department of Health.

“I am also gravely concerned that Providence’s decision not to report Dr. A or Dr. B to federal or state medical oversight bodies allowed both surgeons to simply resign from Providence and then continue to endanger patients at other hospitals,” Waldref added.

The settlement required Providence to enter into a Corporate Integrity Agreement with the HHS Office of Inspector General, which requires Providence to implement and maintain specific quality-of-care and patient safety obligations. The agreement also requires the health system to hire outside experts to perform annual claims and clinical quality systems reviews.

“Our agency will continue to hold accountable medical providers who perform medically unnecessary procedures and fraudulently bill federal health care programs,” Steven J. Ryan, special agent in charge of HHS-OIG, stated in the press release. “Working closely with our law enforcement partners, HHS-OIG remains committed to protecting the health of patients and the integrity of the taxpayer-supported programs serving them.”

The case began when the former medical director of neurosurgery at Providence St. Mary’s filed a whistleblower complaint in January 2020.

In a whistleblower complaint, the False Claims Act requires DOJ to investigate the allegations and choose whether to take over the case or let the whistleblower move forward on behalf of the US. The whistleblower, or relator, can then receive part of the settlement, the press release noted.

In the Providence case, DOJ intervened in the case in January 2022. The settlement agreement establishes that the relator will receive $4.1 million of the total settlement amount.