Straub pays
$2.4 million for
mishanded bills

A 3-year investigation finds
the U.S. and state governments
were excessively charged

By Helen Altonn
Star-Bulletin

A state-federal investigation of alleged mishandling of billings and accounts at Straub Clinic & Hospital has resulted in the hospital paying $2.4 million to the governments.

More cases are expected involving other health care facilities in a continuing effort by state and federal agencies to halt overbillings, whether by errors or fraud.

U.S. Attorney Steven S. Alm said yesterday that a three-year investigation led to the Aug. 14 settlement with Straub. The hospital paid the federal government $2.3 million and the state $100,000.

The hospital also agreed to a "corporate integrity plan" requiring comprehensive accounting records, periodic audits and a hot line for fraud and abuse reports.

Dr. Blake Waterhouse, Straub's chief executive officer, sent a letter to the hospital's 2,000 employees last week informing them of the settlement. But Straub's marketing and public relations officials yesterday refused to discuss what they said was a "private" letter.

Alm's announcement prompted release of the letter and a statement from Waterhouse saying: "The billing errors occurred in a limited but complex portion of the hospital's billing process. Direct patient care and quality of patient care were not involved."

He said the settlement was negotiated "to eliminate what would have been a distracting, lengthy and costly litigation."

Larry Tong, health care fraud coordinator for the U.S. attorney's office, said, "This is the most substantial civil settlement that our office has had in this particular area."

Alm said the investigation began in October 1995 with allegations about Straub's treatment of credit balances.

Investigators analyzed records in Straub's executive offices and Information Services Department and interviewed witnesses to determine whether federal regulations were followed covering Medicare, Medicaid and CHAMPUS, the military health benefits program.

They found Straub had "unbundled" its billings for outpatient laboratory services, Tong said.

Instead of submitting one bill for multiple tests on a single blood sample at a lower charge, the hospital billed individual parts of the test, he said.

"It's similar to going to a restaurant: When you order a complete meal, it costs less than all a la carte."

Straub obtained about $238,494 in excess Medicare payments through the unbundling practice and $35,000 in excess CHAMPUS payments from 1992 through 1995, the investigators found.

Tong said his office was prepared to sue Straub on a charge that it used a computer program to erase about $1,493,057 in credits on 11,000 patient accounts to escape returning excess payments to the government.

Under the False Claims Act, the hospital would have been liable for a penalty of up to $10,000 for every false record or claim it maintained, Tong said.

But the federal government did not seek criminal charges.

Alm said Straub may still participate in Medicare, Medicaid and CHAMPUS programs. "We view this case as involving business practices rather than medical care," he said.

"We believe the settlement adequately addresses the government's concerns while allowing Straub to continue to deliver quality medical services to the people of Hawaii."

Waterhouse said every hospital "has to contend with credit balances, lab blood test charge 'bundling' and ever-changing, vague and ambiguous Medicare regulations."

He said Straub's internal investigation found errors were unintentional, "made in a good-faith effort to comply with these complex federal billing requirements."

In his letter to employees, Waterhouse said the settlement won't affect this year's finances or budget.

He said the hospital has a new computer system and has implemented an "organizationwide program designed to

ensure that Straub is in compliance with complex government regulations."