August Scam-of-the-Month Award


The month is only two-thirds over, but it’s already clear who wins the August Scam-of-the-Month Award.  Cleveland Imaging & Surgical Hospital, in Cleveland, Texas, wins in a walk.

It turns out that back in 2011 the hospital sold the right to use its hospital billing codes to free-standing clinics.  So under the arrangement, when the clinics sent bills, they were hospital bills rather than clinic bills because—you guessed it—hospital bills are bigger than clinic bills.

Why would the hospital enter the arrangement—an arrangement that’s clearly illegal under federal and Texas law?  Because it got a 15% cut of all the clinic billings.  So the clinics got more money—hospital rates versus clinic rates—and the hospital got more money—heck, it didn’t even see the patients.

Everyone got more money—everyone except the payers.  The payers got less money because they were paying for services—hospital services—that the patients didn’t receive.  The payers included Medicare and Aetna.  Medicare threatened to revoke the hospital’s Medicare back in 2012 because its outpatient-to-inpatient ratio was sky high.  That’s when the hospital had to cancel the deal.

Aetna sued for fraud, misrepresentation, unjust enrichment and conspiracy, and yesterday a Texas federal court awarded it $8.5 million.

A Texas-size award for a Texas-size scam.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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