Whistleblower Suit Costs Banner Health $18.3M

A clinical documentation specialist worked only three months before resigning and accusing the health system of fraudulent billing practices.

Phoenix-based nonprofit Banner Health hired Cecilia Guardiola, a registered nurse, as corporate director of clinical documentation in fall 2012.

Within three months, however, Guardiola resigned over concerns that Banner seemed to be billing Medicare improperly. When she told administrators that she found inflated numbers and falsified documents, her bosses were allegedly unwilling to change.

"It became clear to her very quickly that the interest was on enhancing revenue and not on guaranteeing compliance or integrity," Guardiola's attorney Mitch Kreindler told HealthLeaders Media.

Guardiola filed a federal whistleblower lawsuit under the False Claims Act in 2013, detailing her allegations. That lawsuit was settled this week, with Banner agreeing to pay more than $18 million, the Department of Justice (DOJ) announced Thursday afternoon.

Related: Banner False Claims Settlement is Plaintiff's Third

Twelve of Banner's hospitals in Arizona and Colorado had been accused of taking patients who could have been treated in an outpatient setting and admitting them instead for costlier inpatient care, then submitting false claims to Medicare.

"Hospitals that bill Medicare for more expensive services than are necessary will be held accountable," said Christian J. Schrank, special agent in charge for the Department of Health and Human Services (HHS) Office of Inspector General (OIG), in the DOJ's written announcement.  "Medical decisions should be made based on patients' conditions and needs, not on providers' profits."

The organization has until April 20 to pay the federal government $18.3 million, plus 2.25% interest calculated from last May, according to the settlement agreement, which was filed in federal court this week. The government will then pay Guardiola 18% of that amount, about $3.3 million.

The health system must also pay more than $144,000 in Guardiola's legal fees.

Banner spokesperson Becky Armendariz released a statement saying the organization is "fully committed" to complying with regulations and the law while providing high-quality patient care.

"Although the rules that dictate when a hospital can accommodate a physician's request to admit a Medicare patient are complex and evolving, our policy has always been to make those decisions in accordance with government guidelines," Armendariz said in an email.

"The settlement does not involve any finding of wrongdoing on Banner's part, and we are pleased to resolve this matter to avoid the disruption and expense of ongoing litigation," Armendariz added.

Guardiola's complaint had accused Banner of knowingly defrauding the government in three ways: by falsifying Medicare bills to avoid denials, by billing short-term outpatient services as though they were inpatient services, and by inflating the number of hours spent observing patients.

The complaint lists hundreds of specific transactions that Guardiola alleged were billed inappropriately.

"In many of these situations, defendants billed the services as inpatient even though the patient was admitted to and discharged from the hospital on the same calendar day," the complaint states. "As a result of their conduct, the defendants reaped substantial and illicit profits at taxpayer expense."

Document: Read Banner Health's Settlement Agreement

Banner's spokesperson declined to comment on the specific allegations Guardiola and her attorneys raised.

Kreindler said his client, who was not available for an interview Thursday, has had a tough time finding work because she challenged Banner's practices.

"Being a whistleblower is a little bit like being a homeless shelter," he said. "Everybody thinks we should have them, but nobody wants to be near them."

Editor's note: This story has been updated to include additional information.