St. Vincent Hospital, Worcester: Higher Charges for a Valve That Cost the Same

St. Vincent Hospital in Worcester agreed to pay $1,784,896 in a Medicare outlier settlement over excess payments caused by inflated hospital charges. The hospital admitted reporting higher costs for a heart-valve device whose actual cost had not increased. Medicare paid more after the hospital raised its prices, including for patients whose care did not justify the extra payment.

What St. Vincent Admitted About Its TAVR Charges

St. Vincent admitted that its inpatient price increases generated outlier payments it should not have received. Its settlement agreement traces those increases to advice about the local market, followed by decisions that did not calculate their effect on Medicare payments for certain diagnosis-related groups.

The Worcester, Massachusetts hospital was a for-profit facility acquired by Tenet Healthcare in 2013. A consultant told Tenet that the hospital’s charges were too low for its market. St. Vincent responded by raising prices throughout its chargemaster, the file of charges used in billing.

With Tenet’s approval, St. Vincent raised all inpatient charges by 15% in May 2017, in addition to a regularly scheduled annual increase that October. It raised them another 18% around April 2018 and another 18% around October 2018. The agreement records the same omission at each step: the hospital had not calculated the effect on Medicare Part A payments for certain diagnosis groups.

The admissions cover 2018 and 2019 claims for cardiac defibrillator implants, other cardiothoracic procedures and transcatheter aortic valve replacement. The valve procedure, known as TAVR, replaces a thickened aortic valve with an artificial one. Its claim separates the device charge from the procedure charge.

St. Vincent admitted receiving outlier payments for many patients who needed neither more intensive care nor a stay beyond the diagnosis group’s expected length. It also admitted that its actual costs for the valve device did not rise between 2017 and 2019, even as the chargemaster increases made the costs reported to Medicare rise. A decision about market prices had reached a payment intended for unusually costly care.

How Higher Charges Become Outlier Payments

Hospital charges can increase Medicare payments when a lagged cost-to-charge ratio turns today’s higher prices into an overstated estimate of today’s costs.

Medicare ordinarily pays a set amount for an inpatient stay, based on its diagnosis and treatment group. An outlier payment adds money when the estimated cost exceeds that payment and a further loss threshold. Extra care for complications or a longer stay can produce those unusually high costs.

To estimate the cost, the contractor multiplies current charges by a ratio drawn from earlier hospital cost reports. Those annual filings report costs and charges by cost center, as the Centers for Medicare & Medicaid Services explains. When charges rise faster than costs, that older ratio overstates the cost of the stay, and a case can cross the threshold while the care stays the same.

Other hospitals help fund these payments through lower base rates, as the Medicare Payment Advisory Commission explains. Money set aside for exceptionally expensive care was reaching St. Vincent through higher prices for care that had not become exceptionally expensive.

The Health Plan That Noticed the Markup

A Medicare Advantage health care plan alerted St. Vincent to an unusually large number of substantial TAVR outlier payments in mid-to-late 2019. The agreement records the plan’s report that charges for the TAVR diagnosis groups ranged from a 720% markup over the device’s actual cost in February 2017 to a 1,350% markup in December 2019. The valve itself cost the hospital no more.

During its review of the plan’s complaint in late 2019, St. Vincent connected the chargemaster increases to more outlier payments from Medicare Part A. It concluded that its actual cost-to-charge ratio had changed by ten percentage points from the ratio used during the payment period, triggering a requirement to recalculate the inpatient outlier payments.

The device’s purchase cost, the charge assigned to it and the amount the payer sent back told different parts of the same story.

What the Charge File Cannot Explain Alone

Charge-setting and reimbursement staff can connect a price decision to the outlier revenue it generated. A charge file records the new price, not the reason. Our whistleblower experts work with healthcare insiders who understand the decisions behind those entries.

A 2023 study, Types of Hospital Frauds: Nature and Methods of Prevention, in the Journal of Forensic and Investigative Accounting, examined 80 hospital financial fraud cases drawn from Justice Department announcements. It identified matching billing to medical records and analyzing coding data as approaches that could have detected or prevented most of the billing schemes in its sample. The useful lesson here is the comparison across records: what the hospital billed, what it spent and what care the patient received.

Finance employees may also know when the hospital recognized an overpayment and who decided how much to return. The plan’s warning, the hospital’s recalculation and its payment to the contractor show why the later decisions deserve the same attention as the original price change.

The Voluntary Payment Left a Repayment Gap

St. Vincent returned approximately $7.4M to its Medicare contractor in July 2020, before the settlement. It calculated that payment using the difference between the outliers already received and the amounts recalculated with ratios from its 2018 and 2019 cost reports. The hospital admitted that the payment covered most, but not all, of the relevant cardiac outlier payments.

The Justice Department’s December 9, 2022 announcement described the remaining allegation plainly: the hospital had failed to reimburse the government fully after becoming aware of the problem. Discovering the problem, estimating a repayment and returning everything owed were separate events.

The Outlier Pattern Beyond Worcester

Tenet’s 2006 settlement covered allegations that hospital charges rose substantially faster than patient-care costs, producing excessive outlier payments. That part of the government’s account also included billing for services and supplies not provided. The parent company’s earlier case shows why the relationship between charges, costs and actual care matters across a hospital business.

Silver Lake Hospital, a long-term care hospital in Newark, New Jersey, reached a settlement in January 2024 over alleged excessive outlier payments. The government alleged that charge increases left it unable to repay the outlier payments when its cost reports were reconciled. It also alleged that Silver Lake transferred money to investors without receiving equivalent value when the hospital had reason to believe it could not repay its Medicare debt. The investor distributions made the later destination of the money part of the case.

At United Memorial Medical Center, the government alleged another way to preserve excessive outlier payments: raising inpatient charges while understating those charges on Medicare cost reports. The alleged underreporting prevented adjustment to reflect actual costs, and the hospital allegedly concealed its repayment obligation. The charge decision and the later accounting each mattered.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. For an insider who understands both the outlier revenue and the repayment decisions, those connections are the reason to speak with us.

When You Know Why the Prices Changed

If you work in hospital billing, reimbursement, finance or compliance and know how a charge increase became outlier revenue, speak with our whistleblower experts about those charge increases. We connect the pricing decisions, patient care and repayment history to build your strongest hospital whistleblower case, and bring in whistleblower lawyers who know Medicare outlier billing. We stay beside you through the case, with the expertise to pursue what the payment totals alone cannot explain.