In an event that has caught the attention of healthcare law and ethics professionals nationwide, Sparrow Health System in Lansing has agreed to pay a settlement of $671,300. The resolution came in response to allegations of the health system violating the False Claims Act by improperly employing “incident-to” billing. The announcement, made by U.S. Attorney for the Western District of Michigan Mark Totten, reinforces the cruciality of honest, accurate billing within our Medicare system.

The False Claims Act exists to hold healthcare providers accountable for fraudulent activity, particularly concerning federal healthcare programs like Medicare. When healthcare organizations manipulate or misuse the billing system, it disrupts the delicate balance of trust and accountability between patients, physicians, and these programs.

“Incident-to” billing is a provision allowing Advanced Practice Providers (APPs), including nurse practitioners and physician assistants, to bill a patient encounter under a supervising physician’s name and reimbursement rate, provided specific criteria are met. This arrangement is designed to foster comprehensive and efficient patient care, but it can also open a window for potential misuse if not strictly adhered to.

Sparrow Health System was alleged to have improperly billed services under physicians’ names and reimbursement rates, for services provided by mid-level practitioners where the criteria for “incident-to” billing were not met. This misapplication of billing protocols has significant ramifications, as it misrepresents the provider of care and manipulates the allocation of Medicare funds.

The misuse of such provisions is seen as a direct breach of trust, compromising the integrity of the Medicare system. It also leads to the inappropriate use of taxpayer funds designated for the healthcare of those most in need. Such actions prompt stringent investigations by organizations like the U.S. Department of Health and Human Services’ Office of Inspector General (HHS-OIG), aimed at ensuring accountability for those found in violation.

In the face of such allegations, Sparrow Health System cooperated fully with the investigation, undertaking an internal audit of violations alleged in the qui tam and sharing the results with the United States. Their cooperation reflects a commendable effort to rectify the situation and restore trust.

The settlement also includes the resolution of whistleblower claims brought under the qui tam provisions of the False Claims Act against Sparrow. These provisions allow a private party to file an action on behalf of the United States and receive a portion of the settlement if the government takes over the case and reaches a monetary agreement with the defendant.

In light of this case, healthcare organizations should revisit their understanding of “incident-to” billing and ensure strict adherence to its criteria, thereby reinforcing their commitment to ethical billing practices. As seen with Sparrow Health System, failure to do so can lead to significant financial consequences and damage to the organization’s reputation.

While unfortunate, cases such as these serve as important reminders for all healthcare entities, emphasizing the essential nature of transparent, accurate billing, and the dire consequences that can ensue when these principles are compromised.