Judge dismisses False Claims Act suit against Kernan Hospital

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Saying the government failed to present evidence of fraud, a federal judge has dismissed the lawsuit brought against Kernan Hospital for allegedly adding $1.6 million in billings to Medicare and other programs by falsely diagnosing people with severe malnutrition.

Judge Richard D. Bennett dismissed the case against Kernan without prejudice last week. In his decision, Bennett said the government had “failed to adequately plead allegations of fraud under the False Claims Act.”

Kernan Hospital, part of the University of Maryland Medical System, had been accused of fraudulently billing Medicare, Medicaid and Tricare programs for incidences of kwashiorkor — a rare, life-threatening form of malnutrition caused by lack of protein in the diet.

The lawsuit claims that since 2005 the hospital has been taking advantage of a state incentive program that rewards hospitals that deal with complex and challenging cases.

The government said Kernan had been “upcoding” and putting the diagnosis code for kwashiorkor on patients’ records to make their cases more complex than they should have been.

Bennett’s ruling, signed Monday, came after a July 12 hearing in U.S. District Court in Baltimore. The judge said the government’s complaint failed to identify the false claims at issue.

Testimony by the government’s expert analyst, who examined billing records and identified potential false claims, was not enough, he ruled.

“The rest of the Complaint does not explain how the Government’s expert conducted her analysis, what precisely makes a malnutrition code ‘inappropriate,’ and generally does not provide enough information for Kernan to identify which claims the Government contends were false,” Bennett wrote. “Put simply, the Complaint fails to identify the ‘who, what, when, where, and how’ of the alleged fraud.”

A spokesman for Kernan referred requests for comments to Mary Lynn Carver, senior vice president of communications and public affairs for the University of Maryland Medical System. In an email, Carver said she was “pleased that the court has found in our favor and dismissed the government’s case.”

The dismissal without prejudice allows the government to file a new complaint on the same grounds in the future.

“We are considering whether to appeal or file an amended complaint,” said Vickie E. LeDuc, a spokeswoman for the U.S. Attorney’s Office in Baltimore.

The dismissed case is U.S. v. Kernan Hospital, No. 11-2961, U.S. District Court (Baltimore).