On May 14, 2018, the U.S. Attorney’s Office for the Southern District of Texas announced that Memorial Hermann Health System (MHHS) will pay $1,929,071.38 to resolve allegations that it improperly billed government healthcare programs for inpatient services provided to Medicare beneficiaries who were admitted for scheduled surgical procedures, but who the government contends should have been treated in outpatient or observation settings.

Specifically, the government alleged that from 2009 through 2014, three MHHS hospitals submitted claims to Medicare for scheduled surgeries in which the inpatient stay lasted two days or less, and that these claims should have been submitted as less expensive outpatient services.  The Department of Justice’s press release discussing the MHHS settlement is available here.  The MHHS settlement comes on the heels of another settlement with the Department of Justice, discussed in detail here, in which Genesis Medical Center in Davenport, Iowa, paid $1.88 million to resolve claims of improper billing for hospital inpatient admissions when, according to the Department of Justice, those claims should have been billed at the lower reimbursement rate for outpatient or observation services.  The MHHS and Genesis Medical Center settlements represent recent large-dollar settlements that implicate CMS’s revisions to its inpatient admission standards pursuant to the Two Midnight Rule, which took effect on October 1, 2013.

CMS recently proposed changes to the Two Midnight Rule in the FY 2019 Inpatient Prospective Payment System Proposed Rule. King & Spalding’s May 1, 2018 Client Alert analyzing proposed changes to the Two Midnight Rule is available here.