Metro Settles Fraud Suit

December 9, 2003
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GRAND RAPIDS — Metropolitan Health Corp., not wanting to play out what could have become a major distraction from the development of a new suburban hospital campus, has agreed to pay $6.25 million to settle a federal lawsuit that charged the Grand Rapids health system with improperly billing Medicare and violating federal regulations.

The settlement comes just three weeks after the U.S. Department of Justice agreed to intervene in portions of the lawsuit, which was filed in July 2002 by a former Metro Health executive and remained sealed until Nov. 28.

While agreeing to the settlement, Metro Health executives deny any wrongdoing, strongly dispute the allegations and believe they would have prevailed in court. Settling the case and paying the fine is a “sound business decision” that avoids costly and lengthy litigation at a time when the health system is focused on developing and relocating to a new $150 million hospital now under construction in Wyoming.

“Even though we’d like to fight the good fight, we have to get this behind us and move on,” Metro Health President and CEO Mike Faas said. “We don’t agree with it. We’ll never agree with it.”

Fighting the allegations in court would have cost Metro Health as much in legal fees as settling the case will, and would have come with the uncertainty of a jury trial, Faas said. Prolonged litigation also would have become a significant burden to the health system and staff, detracting resources at a crucial time from the new hospital and an adjoining “health care village” envisioned for the Wyoming site.

Adding to the incentive to settle the case is the pending public sale of millions of dollars in bonds to finance the development.

“We found ourselves in a no-win situation. The alternative would have been an excessive and lengthy legal battle,” Faas said today. “We really wanted to focus on that development.”

The lawsuit began in July 2002 when Mary Scott, Metro’s former senior vice president for network development, filed a whistleblower case against Metro Health after she was fired in January 2002. In the lawsuit, Scott claimed Metro Health overpaid several of its physicians beyond fair market value, overpaid for a primary-care medical practice acquired in 1996, undercharged two physicians for office rentals, and billed Medicare for $47.3 million in procedures that were performed without written authorization from physicians.

Scott claims she was terminated after bringing her concerns to Metro Health’s Executive Committee.

Faas contends Metro was already examining the issues and had reported the same concerns to the federal government as part of a regular corporate compliance process. Scott was terminated when her position was eliminated during a corporate reorganization that involved numerous positions, he said.

Metro has since corrected all of the internal processes and procedures that required attention, Vice President for Marketing and Public Relations Jim Childress said.

Faas called the amount that Metro must repay Medicare “extreme” and says the dispute is the result of “highly technical and interpretive” federal regulations.

“The laws and government rules that regulate health care are constantly changing and highly complex. In some cases they are also very rigid and can produce excessive penalties that fail to reflect individual circumstances or intent. What has happened to Metropolitan is an example of both situations,” the health system said in a statement.

Metro Health will pay the $6.25 million over four years, which will ease the financial burden. The repayment should not affect Metro’s upcoming bond sale, Faas said.               

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