Lancaster General Hospital Accused of Submitting Invalid Claims to PA Hospital Reimbursement Program

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Five Pennsylvania hospitals have sued Lancaster General Health alleging the medical center submitted fraudulent claims to the state’s Extraordinary Expense Program (EE) and misdirected millions of dollars to itself. Also named in the suit are The University of Pennsylvania Health System, Trustees of the University of Pennsylvania, and two John Doe defendants—Lancaster General employees who were allegedly responsible for developing and implementing the “fraudulent claims submission policy.”

The lawsuit notes that the EE Program was designed to compensate hospitals for providing “charity medical care” to uninsured citizens and maintains “a pot of money” that is to be divided among Pennsylvania's hospitals each year. According to the complaint, the state's Auditor General found that from 2010 to 2012, approximately 75 percent of Lancaster General’s claims were invalid, meaning it was compensated at a rate that was 7.5 times higher than other hospitals. The result, the case alleges, was that Lancaster General was overpaid by “nearly $9 million” – money that should have been directed to the state’s other medical facilities.

Notably, the lawsuit claims the defendants employed the same fraudulent practice during 2008 and 2009 but returned the overpaid funds without argument or legal challenge after being ordered by the state to do so. According to the complaint, the defendants stopped improperly submitting fraudulent claims in 2013, but still owe the EE Program’s other participants money they unlawfully retained in 2010, 2011, and 2012.

The case notes the defendants’ claims were considered invalid for “a number of reasons,” including:

• the patients were not actually uninsured;
• the cost of service “did not exceed the hospital’s actual average cost per stay for all patients”;
• the hospital was partially or totally compensated for the care it provided; and
• the hospital never provided the care claimed in the submission.

According to the lawsuit, the John Doe defendants – Lancaster General employees – were aware that the hospital had overstated its claims but submitted them anyway. From the complaint:

“For Fiscal Year 2010, Lancaster General Hospital’s claimed expenses represented 46.7% of all qualifying expenses claimed by all hospitals—a figure that shows that the submission was so grossly inflated that those who prepared it knew or should have known it was false.” 

The case argues that each invalid claim was submitted through an online platform and constituted “an act of wire fraud.”