United Memorial Medical Center, Houston: Higher Charges on the Bills, Lower Charges on the Cost Reports

The United Memorial Medical Center outlier settlement in 2023 called for $2 million plus additional contingent payments over allegations of excessive inpatient outlier payments and double billing for COVID-19 tests. The government said the hospital raised the charges on its inpatient bills while understating charges on the cost reports used to check the payments. For someone who worked with those figures, the question is who decided they should tell different stories.

Doctor’s Hospital 1997 L.P., doing business as United Memorial Medical Center LLC, formerly operated hospitals in the Houston, Texas area. The Department of Justice announced the settlement on December 20, 2023. It resolved a whistleblower case originally brought by a former United Memorial employee. The agreement covered separate allegations about inpatient reimbursement and payments for COVID tests, each with its own billing trail.

What Was Alleged About the Outlier Payments?

The hospital outlier payment fraud allegations concerned Medicare and TRICARE payments. The government alleged that United Memorial rapidly increased inpatient charges and significantly underreported charges on Medicare cost reports. Together, those choices allegedly kept Medicare and TRICARE from adjusting the payments to reflect what the care actually cost.

Outlier payments provide extra reimbursement for unusually expensive inpatient care. The calculation starts with the hospital’s charges and converts them to estimated costs. That puts a hospital’s own pricing and reporting decisions inside the payment formula.

United Memorial allegedly manipulated both sides of that process. The government also alleged that it hid its obligation to return excessive outlier payments and kept money it should have paid back. Put simply, the higher charges allegedly raised the payments, and the lower reported charges allegedly kept them from being corrected.

The Cost Report Was Part of the Payment Mechanism

A hospital’s cost report helps determine how much of its billed charges Medicare treats as the cost of care. The annual filing described by CMS reports costs and charges by department to Medicare’s payment contractor.

For a typical inpatient stay, Medicare’s diagnosis-group payment supplies the starting amount. An outlier supplement becomes available when the estimated costs cross the applicable threshold above that payment and its adjustments. The cost-to-charge ratio does the conversion: current charges multiplied by the ratio produce the estimated costs used in the outlier calculation.

The timing matters. Under Medicare’s outlier payment rules, the ratios used when a claim is processed generally come from the latest cost report that Medicare’s payment contractor has settled, even provisionally. Current charges can therefore meet a ratio built from earlier figures. When prices rise faster than costs, the older ratio can make the new charges look like more expensive care.

The later reconciliation checks payments against costs and charges from the period of care and can require the hospital to return the excess. Underreporting the charges can distort the correction itself, which is why the United Memorial allegation reaches beyond a price increase. The government alleged that the information needed to bring payments back into line with costs was also wrong.

Medicare finances outlier payments by reducing hospitals’ base payment rates. Participating hospitals contribute through those reductions. Inflated outlier claims take money set aside for unusually costly patient care.

St. Vincent Shows What Charge Increases Can Change

St. Vincent Hospital in Worcester admitted receiving outlier payments it was not entitled to. According to the Justice Department’s December 2022 announcement, it raised all inpatient charges three times, including charges for a cardiac valve replacement procedure.

The increases produced more outlier payments, including for cases without unforeseen complications or extended stays that would explain extraordinarily high costs. The hospital also failed to reimburse the government fully after becoming aware of the issue.

COVID Tests Billed Twice

United Memorial’s COVID test double billing allegations involved the same tests presented to different government payers. The HHS Office of Inspector General’s account says the hospital sought payment from the Health Resources and Services Administration’s Uninsured Program and submitted duplicate claims to Texas or Houston. It allegedly received state or city reimbursement for those same tests and failed to return duplicate payments to HHS.

If your billing work showed the same tests in federal and state or city payment records, our whistleblower experts can help turn what you know about the duplicate payments into a case.

Who Was Supposed to Pay?

One of United Memorial’s principals agreed to fund the settlement, and United Memorial agreed to pay if the principal did not. The fixed amount was the floor, with contingent payments capable of adding to it.

The Silver Lake Hospital outlier settlement reached owners through a different allegation. The government said Silver Lake raised charges far beyond its cost increases and its ability to repay after cost-report reconciliation. It also pursued transfers of hospital money to investors without equivalent value in return when the hospital had reason to believe it could not repay Medicare.

United Memorial’s agreement instead made a principal the source of the settlement payment.

United Memorial also agreed on December 14, 2023, to exclusion from federal health care programs for ten years, as the HHS Office of Inspector General reported.

The Decisions Behind the Claims

Connecting a price change to the claims it inflated is work our whistleblower experts do with hospital insiders. At United Memorial, the allegations make that connection unusually clear: the charges on the bill, the charges on the cost report and the handling of money that should have been returned. Someone who worked with those figures may know why they differed and who understood the effect on payments.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. The insider’s value is in explaining the decisions behind the figures: how a charge became a claim, how the hospital reported it and what happened when the numbers needed correcting.

When You Know Why the Figures Differed

If your work in hospital finance or billing showed you why the charges, cost reports or COVID test payments did not match, speak with our whistleblower experts about the decisions behind them. We build the case around what you know, bring in whistleblower lawyers who understand hospital outlier and cost-report cases, and stay beside you through the outcome.