Charter Behavioral Health: Unnecessary Psychiatric Stays, a Later Bankruptcy and Separate Settlements

In the Charter Behavioral Health fraud case, the company agreed to pay $4.75 million to resolve allegations that its Orlando hospital unnecessarily admitted elderly Medicare patients and extended their psychiatric stays to collect improper reimbursements. The government alleged that doctors increased admissions under pressure from corporate headquarters about financial performance. If you worked where the pressure to admit patients conflicted with the treatment they needed, that connection is the heart of this case.

Corporate Pressure Behind Psychiatric Admissions

The government alleged that Charter’s financial demands reached the doctors making admission decisions. In its account of the Orlando allegations, the Department of Justice described hundreds of elderly Medicare beneficiaries whose admissions and extended stays allegedly generated improper payments.

The government’s complaint alleged that a large proportion of the hospital’s Medicare patients came from Orlando-area nursing homes or assisted-living facilities and had debilitating organic brain disorders, including Alzheimer’s disease and severe dementia. It described patients often incapacitated by disorientation, yet routinely admitted for psychiatric treatment by doctors allegedly responding to headquarters’ pressure to increase admissions.

That puts the admission decision inside the business story. The government connected the hospital’s financial performance to decisions about who entered treatment. Its allegations also reached how long patients stayed. For an insider, those are different places to see the same pressure: the decision to accept a patient and the decision to keep that patient in a psychiatric bed.

We see the upside-down priority in that allegation. Elderly patients with severe cognitive impairment needed care shaped around their condition. Headquarters allegedly wanted more admissions to improve the numbers. The patients’ need for care became an opportunity to bill for care the government said was unnecessary.

The Treatment Behind the Claim

Inpatient psychiatry is organized around active institutional treatment. That is the distinction the Medicare mental health coverage framework makes between a psychiatric hospital stay and other treatment settings. In Charter’s case, the allegation concerned whether patients needed the psychiatric services billed to Medicare, with corporate pressure supplying the alleged reason for admitting more of them.

The Orlando Settlement Changed Medicare Billing Access

The Orlando resolution required government monitoring and a break in Medicare billing as well as a payment. The Justice Department announced it on August 19, 1998.

The original case came from two whistleblowers. The government joined their False Claims Act lawsuit and announced that they would share an award from the recovery. The Department of Defense’s Defense Criminal Investigative Service office in Orlando investigated with the Justice Department’s Civil Division.

The hospital accepted a five-year corporate integrity agreement under government monitoring. It also agreed not to bill Medicare for any services for 15 months beginning August 1, 1998. Those terms reached the hospital’s ability to earn Medicare revenue after the settlement, a concrete consequence for an operation accused of using unnecessary admissions to generate that revenue.

The Bankruptcy Settlement Had Cash and Contingent Claims

Charter Behavioral Health Systems LLC agreed to a $7 million cash payment in the bankruptcy settlement announced on August 18, 2000. The government alleged overcharging of federal health care programs, including Medicare, through fraudulent billing and false documentation of medically unnecessary inpatient and outpatient psychiatric services.

Charter had filed for bankruptcy protection earlier that year and was liquidating its assets. The cash was due by the end of August or when sales of three specified psychiatric facilities closed, whichever happened first. The agreement therefore tied a payment deadline to the planned hospital sales.

The government also obtained the potential to collect another $8 million through administrative and unsecured claims in the bankruptcy.

The operational allegation had broadened beyond admission pressure at Orlando. Here the government challenged the documentation and medical necessity of services in both inpatient and outpatient settings. The treatment described on paper, the services billed and the care patients needed were all part of the allegation.

The Hospitals Needed Their Medicare Agreements

Charter wanted to sell 21 hospitals without interrupting Medicare payments. Doing so required the government’s consent to transfer the facilities’ Medicare provider agreements to new operators. We find it telling that a chain accused of overbilling Medicare needed the government’s blessing to keep that revenue flowing through a sale.

The agreement preserved the Health Care Financing Administration’s right to audit Charter’s fiscal year 2000 claims and recover potential overpayments to any Charter facility. The United States would waive its civil monetary claims under the False Claims Act, while those audit rights remained.

An Earlier Chain Faced Similar Stay Allegations

The civil allegations against National Medical Enterprises in its psychiatric-hospital resolution included unnecessary admissions and extended stays. The Justice Department’s 1994 account described the alleged practice of keeping patients hospitalized longer than necessary to use up available insurance coverage.

In the National Medical Enterprises account, available insurance coverage supplied the alleged incentive for a longer stay. At Charter’s Orlando hospital, the government described corporate financial pressure to increase admissions alongside allegations of extended stays. Each account points inside the organization, to how financial demands reached clinical decisions.

What Evidence Is Needed to Prove Fraud?

In a case about unnecessary psychiatric stays, the useful connection is between admission decisions, continued treatment, the claims for payment and the financial pressure behind them. Charter’s Orlando allegations make the corporate connection concrete. The bankruptcy allegations add false treatment documentation.

We examine those connections with the person who knows the operation. An admissions employee may recognize the instructions about accepting patients. A clinician may know what treatment a patient needed and received. A billing employee may understand what the hospital claimed. Your knowledge can explain how those parts fit together, including where the written account of treatment departed from what happened on the unit.

How Much of a Settlement Does a Whistleblower Get?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. The Orlando case began with whistleblowers who were allocated a shared recovery award. If you recognize the same conflict between treatment decisions and financial demands, we can assess what your knowledge could contribute to a whistleblower case.

You Saw How the Admission Decision Was Made

If you know how pressure for admissions or longer stays reached patient care, talk with our whistleblower experts about what you saw. We work with you to build your strongest whistleblower case from that knowledge, bring in behavioral health fraud whistleblower lawyers who understand psychiatric hospital claims, and remain your partners throughout it.