Enterprising Nurse Whistleblower Helps Federal Government Secure Third Settlement Against Latest Healthcare System Target

This is the third time that the nurse has brought a successful whistleblower lawsuit against a hospital system where she has worked.

Banner Health, a Phoenix-based health system that owns 28 hospitals across six states, agreed to pay over $18 million to settle allegations that 12 of its hospitals in Arizona and Colorado knowingly submitted false claims to Medicare by admitting patients who could have been treated on a less costly outpatient basis.

Cecilia Guardiola, Banner’s former corporate director of clinical documentation, brought this suit under the federal False Claims Act (FCA), a law that allows private party whistleblowers to report fraud against the government and receive a piece (15 percent to 30 percent) of the recovery as an award. Under the FCA, the government has the option to join the lawsuit and sue an alleged fraudster alongside the whistleblower, as it did in this case. Guardiola worked at Banner Health for less than three months and will receive a whistleblower reward of approximately $3.3 million.

Generally, Medicare compensates healthcare providers significantly less for outpatient services than inpatient services. Per Medicare program rules, a patient’s physician must decide if a patient needs hospital care for 24 hours or more, and if that’s not the case, a patient should not be admitted to the hospital. There is also a third status that falls between inpatient and outpatient called “outpatient observation status.” Observation status is assigned to patients who require a significant amount of treatment or monitoring before a decision can be made about their admission or discharge, for example, following a surgery.

According to the whistleblower’s allegations, Banner Health billed short-stay outpatient services as if they were expensive inpatient services and inflated the number of hours for which patients received outpatient observation care. Guardiola’s complaint specifies more than 700 instances of alleged fraud.

Guardiola was hired in October 2012 to improve Banner’s documentation practices. At the time, Banner believed that missing codes were costing it millions in revenue. Guardiola uncovered many instances where mis-documentation was costing Banner significant amounts of revenue, but upon her review of short-stay inpatient claims, she discovered the alleged fraud. According to the complaint, Guardiola reported the wrongdoing to several members of Banner’s senior management, but it fell on deaf ears. Guardiola left Banner Health only a few months later, and her whistleblower lawsuit was filed within a year of her departure.

In addition to paying $18.3 million, Banner Health agreed as part of the settlement to a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General. The CIA requires the company to engage in significant compliance efforts over the next five years, including retaining an independent review organization to review the accuracy of the company’s claims for all services provided to federally funded healthcare programs.

This is the third time Guardiola has brought a successful whistleblower lawsuit against a hospital system where she has worked. In 2016, she successfully sued Renown Health in Nevada for similar practices and helped the government achieve a $9.5 million settlement. In 2012, as a result of Guardiola’s lawsuit, the federal government achieved a $5.1 million settlement with Christus Spohn Health System. For her role in exposing the alleged frauds at these three health systems, Guardiola has received over $6 million in whistleblower awards.

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