Carolinas Healthcare to Pay $6.5 Million To Settle False Claims Act Allegations

Oct. 5, 2017
Charlotte, N.C.-based Carolinas Healthcare System has agreed to pay the federal government $6.5 million to resolve allegations that the company violated the False Claims Act.

Charlotte, N.C.-based Carolinas Healthcare System has agreed to pay the federal government $6.5 million to resolve allegations that the company violated the False Claims Act.

In a Department of Justice press release, U.S. Attorney Jill Westmoreland Rose announced June 30 that the Charlotte-Mecklenburg Hospital Authority, dba Carolinas Healthcare System (CHS), has agreed pay the settlement as the government accused the health system of “up-coding” claims for urine drug tests in order to receive higher payment than allowed for the tests.

U.S. Attorney Rose made the announcement along with North Carolina Attorney General Josh Stein, and Derrick L. Jackson, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General, Office of Investigations - Atlanta Region.

According the governments allegations and based on court documents, from 2011 to 2015, CHS conducted urine drug tests, categorized as “moderate complexity” tests by the Food and Drug Administration (FDA), but submitted claims that indicated the company had conducted “high complexity” tests. Claims submitted to federal health care programs include a code that identifies the services provided and that triggers a certain payment. The government alleged that CHS engaged in a practice referred to as “up-coding,” by submitting claims using code G0431, which should be used only for tests classified as “high complexity” by the FDA, instead of using code G0434, which is the code for moderately complexity tests, which triggers a payment of approximately $20.00. “As a result of CHS’s up-coding practices, the government alleges that federal health care programs paid CHS, and certain facilities under contract with CHS, approximately $80 more per test for the claims submitted with the higher paying code,” the Justice Department stated in its press release.

The allegations arose from a lawsuit filed by a whistleblower, a former laboratory director for CHS, under the qui tam provisions of the False Claims Act. Under the False Claims Act, private citizens can bring suit on behalf of the government for false claims and share in any recovery. The act also allows the government to intervene and take over the action. The government conducted the investigation and intervened in this action to effectuate the settlement. The laboratory director will receive $1,365,000 from the settlement.

According to, a Charlotte-based news station, in an online story, CHS issued a statement: “On June 30, 2017, Carolinas HealthCare System entered a civil settlement to resolve allegations in a lawsuit that, between 2011 and 2015 CHS billed the wrong code for drug screens reimbursed by Medicare and Medicaid. The lawsuit is not about our patient safety, quality of care, or whether the urine drug screen tests were done correctly. It is about the interpretation and application of complex and constantly changing billing guidelines.”

The health system also stated, “In 2010, the Centers for Medicare and Medicaid Services (CMS) rejected the long standard American Medical Association’s CPT billing codes for drug screens in favor of its own coding system. In 2013 and 2014, CHS asked two separate outside consultants to review our coding process. Both confirmed our coding selection. Carolinas HealthCare System takes compliance with Medicare and Medicaid regulations very seriously and our Corporate Compliance Department is dedicated to facility and physician compliance. CHS takes the concerns of our employees very seriously. In fact, our anonymous HelpLine, which was implemented in 1999, was set up for the exact purpose of encouraging teammates to voice concerns should they arise.”

Further, the health system said it has fully cooperated in the government’s review of this matter, “but after almost two years we determined it was in our best interest to move forward and resolve this issue.”

“The $6.5 million amount that CHS is paying to resolve this matter accounts, in part, for the difference between what CHS was reimbursed for the drug screens, and what Medicare and Medicaid alleges that CHS should have been reimbursed had it used a different code. We are pleased to put this matter behind us so that we can continue focusing on providing the expert level of care that our patients and community demand and deserve,” health system officials said.

“Medical service providers must respect public resources in government health care programs,” U.S. Attorney Rose said in a statement. “As more Americans struggle with healthcare costs, we must ensure that our programs are efficient and compliant. For those medical providers who seek to unlawfully and unfairly take advantage of government health care programs, this case resolution should serve as fair warning.”

“When health care companies try to boost their profits by billing federal health care programs for more expensive services than they actually provided, the Office of Inspector General will ensure they are held accountable for their deceptive schemes,” Special Agent in Charge Jackson said in a statement.

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