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Hospital manager Universal Health settles Medicaid fraud allegations

Posted On: Mar. 29, 2012 11:32 AM CST

WASHINGTON—Hospital management company Universal Health Services Inc. and two subsidiaries have agreed to pay $6.9 million to settle a False Claims Act lawsuit alleging they provided substandard psychiatric treatment to adolescents and other Medicaid fraud allegations.

The U.S. Justice Department said that King of Prussia, Pa.-based Universal Health and its subsidiaries, Keystone Education & Youth Services L.L.C. and Keystone Marion L.L.C., also were accused of falsifying records and submitting false Medicaid claims at the Keystone Marion Youth Center in Marion, Va. run by Keystone Marion.

The Universal settlement was a joint one with the Justice Department and the Commonwealth of Virginia.

The Justice Department said the settlement resolves a whistle-blower lawsuit filed by three therapists at the now-closed facility. UHS and its subsidiaries also paid an additional undisclosed amount under terms of the agreement to the former therapists to settle their separate discrimination claims and attorneys fees. The federal agency and Virginia intervened in the lawsuit in November 2009.

In a statement, Thomas J. Heaphy, U.S. Attorney for the western district of Virginia in Roanoke, Va., said the settlement “resolves disturbing allegations” that Universal Health and its subsidiaries “made false records and presented false claims to Virginia Medicaid in connection with substandard care to emotionally troubled youth” at the residential treatment center.

Justice said the resolution is part of the government's emphasis on health care fraud and a step in the Health Care Fraud Prevention and Enforcement Action Team Initiative, which U.S. Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius announced in May 2009.

Universal Health, a Fortune 500 company, responded to the settlement with a statement from former Keystone Marion Youth Center CEO Rick Bridges, which said the center agreed to the settlement to end the investigation and litigation.

“Marion denies all allegations in the lawsuit,” Mr. Bridges said. “However, due to the litigation costs and financial risks associated with a False Claims Act case as well as the previously announced closing of the facility for unrelated reasons, a decision was made to settle this matter at this time. This settlement is not an admission of liability.”

Mr. Bridges also said the Keystone Marion Youth Center “believes that they provided high-quality care and treatment to our residents and that each child who had been a patient at Marion Youth Center received appropriate and necessary treatment in accordance with the standards of mental health care for the community and all reasonable rules and regulations.”

On Monday, the DOJ announced that a medical diagnostic company, Rosemont, Ill.-based Life Services, Inc., agreed to pay $18.5 million to settle charges that it submitted false claims to federal health programs.