Who Investigates Hospital Fraud: What Corporate Integrity Agreements Change

The Department of Health and Human Services Office of Inspector General and the Justice Department investigate hospital fraud, with state Medicaid Fraud Control Units involved when Medicaid pays. An admission bonus, a coding rule or a referral agreement can explain what the bill alone cannot. When a hospital bills for unnecessary admissions, taxpayers fund inpatient care the patients did not need. A settlement can also put those decisions under independent review long after the hospital agrees to pay.

Who Investigates Medicare Fraud?

The Inspector General investigates Medicare fraud, while the Justice Department’s Civil Division and U.S. Attorneys’ offices pursue civil cases under the False Claims Act. The Centers for Medicare & Medicaid Services and its contractors review claims and refer concerns for investigation.

The federal investigators and civil enforcement offices worked together in the Oroville Hospital investigation, alongside California’s Medicaid fraud investigators.

Whistleblowers can start qui tam cases on the government’s behalf, and the Justice Department decides whether to join. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Our whistleblower experts evaluate the hospital’s conduct and the payment arrangements with you so the case reaches whistleblower lawyers equipped to pursue hospital billing cases.

Why Several Reviews Can Reach the Same Hospital Claim

Hospital payment starts with decisions made before a claim leaves the building. Medicare pays most acute-care inpatient stays through a diagnosis-related group. Complications and other diagnoses can move a stay into a higher-paying group. Outpatient care follows a different payment system. The admission decision and the codes can each change the money.

That is why investigators looking at unnecessary inpatient admissions may need both the patient record and the policy that pushed the admission. A payment reviewer examines whether the stay met Medicare’s requirements. A civil investigation can also examine who encouraged the practice and what the hospital knew when it billed.

The Inspector General’s June 2024 short-stay audit shows how little routine review had reached. For the period from 2016 through 2020, the Inspector General found gaps in the information Medicare’s payment agency received, checks before payment and reviews afterward.

The Inspector General later marked the recommended improvements to checks before payment and reviews afterward as implemented.

What Investigators Follow Inside a Hospital

Hospital billing fraud can involve management, clinicians and coding staff in the same chain of decisions. The 2013 systematic scoping review Hospital Manipulations in the DRG System, in Asian Biomedicine, grouped the practices into corporate, clinical and coding activity. Management controls financial and administrative decisions, clinicians make care decisions, and documentation and coding staff translate the care into the bill.

That framework explains why a coding investigation can reach beyond the coding department. The question may begin with a diagnosis, then lead back to a physician’s decision and a financial incentive set by management. The person who entered the final code may see only the last part of it.

The original clinical record and the history of coding changes provide a way to follow that chain. Honest Mistake or Fraud? Meeting the Coding Compliance Challenge, published in the Journal of AHIMA in 1999, described a computerized audit as a trigger for chart review. Its prescription for verification was specific:

The paper distinguished the original codes, the codes on the initial bill and the codes after later reviews or corrections. It also called for the reason for each change. Those versions can show where the clinical account and the payment account diverged, and what happened after someone challenged the coding.

What Happens When Medicaid or a Private Plan Pays

State Medicaid Fraud Control Units investigate Medicaid provider fraud. Their involvement helps explain why hospital fraud settlements can divide the payment between the United States and a state.

Oroville Hospital agreed to pay $10.25 million in 2024 to resolve allegations involving unnecessary admissions, bonuses for admitting patients and false diagnosis codes for systemic inflammatory response syndrome. The alleged claims reached Medicare and Medi-Cal. The payment was split between the federal government and California. The district announcement put the whistleblower’s reward at approximately $1.8 million of the settlement.

Private insurers also pursue repayment through their own recovery processes and can bring lawsuits. A hospital billing practice can affect different payers, each with its own way of pursuing the money.

The Inspector General Settles Hospital Billing Cases Directly

The Inspector General also settles administrative billing cases directly.

Froedtert Memorial Lutheran Hospital settled in September 2018 after disclosing conduct involving its wound care clinic. The Inspector General alleged that registered nurses provided services without the required physician or other practitioner supervision. The staff performing the work and the supervision behind the claim were the issue.

The Inspector General also has the power to exclude providers from federal healthcare programs. Federal programs cannot pay for the items or services an excluded provider furnishes, orders or prescribes. That authority gives the agency a role beyond recovering a past overpayment.

What Does a Corporate Integrity Agreement Require?

A Corporate Integrity Agreement puts continuing compliance duties and outside review into the hospital’s settlement. The Inspector General’s description of the agreements gives them a five-year term and says the agency does not seek one in every case.

The hospital must assign responsibility to a compliance officer and committee, adopt written standards and train employees. Independent reviewers examine specified practices. The hospital also maintains a confidential disclosure program, restricts employment of ineligible people, reports overpayments and specified events, and sends the Inspector General implementation and annual reports.

The Inspector General can fine a hospital that fails to meet the agreement and exclude it from federal health care programs for a serious breach. Quality-of-care agreements add independent experts who monitor patient care and the provider’s response to problems.

Independent Review Can Reach Admissions and Referral Payments

A hospital Corporate Integrity Agreement can impose independent review obligations covering both the care billed and the systems tracking physician referral arrangements. Oroville’s agreement required an independent review organization to examine selected Medicare claims for medical necessity every year, along with the hospital’s systems for tracking its arrangements with referral sources. The supervision followed the two connected parts of the alleged scheme: the decision to admit and the financial relationship with the physician making it.

An earlier agreement reached into the hospital’s own clinical oversight. St. Joseph Medical Center in Towson, Maryland, settled in 2010 over allegations involving referral payments disguised as service agreements and medically unnecessary stents. Three cardiac surgeons brought the whistleblower case. Its integrity agreement required physician executives to oversee medical staff quality, a consultant to evaluate peer review, and independent examination of the necessity and appropriateness of cardiac catheterization procedures.

The Insider Evidence That Changes the Investigation

The Community Health Systems case drew on whistleblowers working in health information management, nursing, coding, emergency medicine and case management. The government alleged a corporate policy that drove unnecessary inpatient admissions. Different employees saw different parts of the same practice: the decision to admit, the documentation and the bill.

An internal report of concern and an identified overpayment put different facts in front of an investigator. The connection is the hospital’s response. St. Vincent Hospital in Worcester admitted receiving Medicare outlier payments it was not entitled to after increasing inpatient charges. The Justice Department said it failed to reimburse the government fully after becoming aware of the issue. The charge increase, the payment and the later response each tell part of that story.

Self-disclosure and an employee whistleblower case can also reach the same hospital settlement. In the Akron General case, a former internal audit director was a whistleblower. Cleveland Clinic, which acquired the hospital system, also disclosed concerns about physician compensation arrangements put in place by the previous leadership. The government alleged that the payments bought referrals. Both an insider case and a disclosure by the buyer contributed to the resolution.

The government’s decision whether to join does not dictate every outcome. At Texas Heart Hospital, two former physician owners brought a qui tam case alleging that physician ownership depended on meeting a patient-contact requirement. The government declined to take over the case but helped negotiate the settlement. The owners’ position inside the arrangement mattered.

Your Evidence, Our Hospital Fraud Expertise

If you know which admission policy, coding change or referral payment drove the hospital’s claims, speak with our hospital fraud whistleblower experts. We connect what you saw to the claims it produced, build the case with you and bring in whistleblower lawyers who know hospital billing and referral schemes. We stay on your side through the case, including when the conduct you see continues under an integrity agreement.