Appeals Court Nixes Fraud Case Against Baylor Scott & White Health

Texas-based Baylor Scott & White Health has again beat a False Claims Act lawsuit alleging that it inflated medical codes in order to maximize Medicare reimbursement.

On May 28, the US Court of Appeals for the 5th Circuit affirmed a district court decision to dismiss the healthcare fraud lawsuit brought on by the data analytics company Integra Med Analytics.

The lawsuit accused the health system of fraudulently using secondary diagnosis codes for years to increase its revenues. In particular, the company called out the health system for pressuring physicians to use higher value complication or comorbidity (CC) or major complication or comorbidity (MCC) codes when diagnosing patients. The fraudulent coding led to $61.8 billion in false claims submitted to Medicare, the company alleged.

But a district court nixed the False Claims Act lawsuit in August 2019, a move that the appeals court agreed with last week.

The court decided that Baylor Scott & White Health’s clinical documentation improvement efforts, which included resources for physicians on coding CCs and MCCs, were in line with normal schemes to improve hospital revenue through accurate coding of patient diagnoses.

“These facts strongly indicate that a legal and ‘obvious alternative explanation’ for the statistical data presented by Integra Med is that Baylor was simply ahead of the healthcare industry at implementing the Medicare reimbursement guidelines supplied by CMS,” the opinion stated.

Integra Med suggested that, based on its statistical analysis of Baylor Scott & White Health’s claims from 2011 to 2017, the health system was ahead of most healthcare providers in following new guidelines from CMS after the agency reduced standardized reimbursements for hospitals and increased the number of secondary diagnoses.

However, the court pointed out that CMS was clear in the guidance that hospitals would alter their clinical documentation and coding practices and increase case mix consistent with new payment incentives bought on by the Medicare billing and coding changes. The agency even encouraged hospitals to develop clinical documentation improvement programs similar to the one at Baylor Scott & White Health “in order to maximize reimbursement.”

The appeals court also ruled that Integra Med did not provide enough evidence to prove another healthcare fraud accusation against the health system: that it provided unnecessary treatment to patients to maximize Medicare reimbursement.

“Even when plaintiffs in an FCA case use statistics, which can be reliable indicia of fraud, they must still plead particular details of a fraudulent scheme for each claim,” the court wrote. “Here, Integra Med’s complaint contains a conclusory allegation that Baylor was providing unnecessary treatment to its patients. … Integra Med does not present sufficient particular details of this alleged fraud claim.”

Clinical documentation improvement efforts have been proven to maximize revenue for hospitals and health systems. Nearly 90 percent of hospitals that used CDI solutions earned at least $1.5 million more in healthcare revenue and claims reimbursement, a 2016 Black Book Market Research survey found.

More recent research from Guidehouse also credited clinical documentation improvement efforts with increased financial performance and higher quality of care.

But some government officials are leery that new hospital coding practices are leading to increases in healthcare spending overall. Specifically, Massachusetts health policy leaders have called out hospital upcoding as one of the reasons behind a significant increase in commercial inpatient spending in the state.