Former whistleblower shares insight about KRH lawsuit

A former North Valley Hospital manager who blew the whistle on widespread Medicare fraud by two of the nation’s largest health-care companies said this week he is surprised “but not shocked” by the whistleblower allegations of fraud being investigated by the federal government at Kalispell Regional Healthcare.

“Health-care fraud is alive and well, all across the country, sadly,” said James Alderson, who was awarded $20.6 million in 2001 as his share of an $85.7 million whistleblower Medicare fraud settlement.

Alderson successfully claimed that Quorum Health Group and Columbia/HCA Healthcare were systematically defrauding Medicare by filing fraudulent expense reports.

Quorum, now known as Quorum Health Resources, managed North Valley Hospital in Whitefish for many years and now provides consulting services to both North Valley and Kalispell Regional. Quorum, however, is not named in the whistleblower suit against Kalispell Regional.

Alderson came upon the scheme when Quorum took over management of North Valley Hospital in 1990, and was fired when he refused to complete two cost reports — an aggressive report to the government claiming maximum expenses and a more conservative report for internal use.

North Valley Hospital was not affected financially by Quorum’s decision to settle the case. The hospital’s only involvement was to submit paperwork to Quorum during the federal government’s investigation.

Alderson, who now lives in California, told the Daily Inter Lake in a phone interview the whistleblower suit filed against Kalispell Regional by Jon Mohatt, the chief financial officer for the Physician Network at the hospital, is a well-prepared document.

Mohatt alleges Kalispell Regional Healthcare knowingly defrauded the federal government in connection with Medicare, Medicaid, TRICARE and other federal health-care programs, and that the hospital since at least 2011 has engaged in a scheme to pay improper compensation to certain doctors to reward them for referring patients to Kalispell Regional hospitals and clinics.

“I would say it’s a very well-written complaint,” Alderson said. “My hat’s off to the whistleblower. He tried to report [his claims] internally. I’ve met a lot of whistleblowers and in every single case they’ve tried to report internally.”

Alderson said the evidence provided by Mohatt in the complaint seems solid.

“He’s got phenomenal numbers,” he said, pointing to data Mohatt attributed to the Medical Group Management Association, a group Alderson said is considered “the Bible for the health-care industry.

“It’s well-recognized in the industry. The benchmarks he has are very solid,” Alderson continued.

In legal pleadings, including whistleblower cases, if the phrase “upon information and belief” is used, it can mean the case is missing evidence or relies on secondhand information. But that’s not the case in Mohatt’s lawsuit, Alderson said.

“Sometimes people don’t have full documentation,” he said. “This guy’s claim is not based on information and belief, it’s based on documents.”

While Alderson commented that Mohatt may be “very uncomfortable” maintaining his job at Kalispell Regional, “there is some protection. They can’t do a retaliatory discharge.”

Alderson never got his severance pay when he was fired from North Valley Hospital and eventually filed a wrongful discharge lawsuit for which he was compensated an undisclosed amount of money.

It was during his research for the wrongful discharge lawsuit that Alderson said he was tipped off that the duplicate cost reports were being used systemwide. His lawsuit against Quorum Health Group and Columbia/HCA Healthcare alleged more than 200 hospitals had been ripping off the government over a period of 14 years by filing false expense reports.

Alderson’s work on the case included analyzing 11,000 documents from 197 hospitals at the Justice Department’s request. He did the work at night and on weekends while working a full-time job. By the time all was said and done, more than 40 private attorneys put in 75,000 hours, and nearly $30 million in legal and accounting resources was spent to complete the case — on top of Alderson’s exhaustive research.

During earlier interviews with the Daily Inter Lake Alderson recalled how those he confided in were skeptical.

“Everyone’s reaction was you couldn’t have found something that big,” he said.

HCA Inc., at the time the nation’s largest for-profit health-care provider, paid $881 million to settle the Medicare fraud charges.

One important outcome of Alderson’s case was the requirement that every hospital hire a compliance officer.

“I joke I created 5,000 jobs,” he told the Inter Lake this week.

Alderson speculated Kalispell Regional’s case likely revolves around “a breakdown in the compliance end of things.

“You’d like to think he could have gone to the board, and the compliance officer could go to the board,” he said. “At most hospitals the compliance officer is completely ineffective because they report to the administrator. I think there’s certainly a responsibility of the board to take a look at internal compliance programs.”

The fact that Kalispell Regional has set aside $21.5 million for a potential settlement also is telling, he said. Under general accounting rules, a business entity doesn’t have to set aside money if it’s only a possibility of wrongdoing, but if it’s probable there will be a loss, “then in the financial statement you have to record it,” he explained. “For them to reserve money it has to be at the highest level” of probability.

Commenting on the settlement in the works for the Kalispell Regional whistleblower suit, Alderson said the $21.5 million set-aside “is a sizable amount for a hospital that size.”

He speculated the government may choose to intervene in the lawsuit on the day of settlement to wrap up its involvement in the case. “That happens a lot” in whistleblower cases, Alderson said.

The health-care industry has been prone to whistleblower lawsuits over the past couple of decades. And they take time, Alderson pointed out. It took 10 years after he filed his first lawsuit against the health-care companies to see the case come to a close.

The settlement in Alderson’s case brought the total to $1.7 billion paid by HCA to settle Medicare fraud charges at that point in time. The company paid $840 million in 2001 to settle other whistleblower cases and pay criminal fines.

Whistleblower cases have continued through the years.

In 2014 Community Health Systems Inc. (CHS), of which Quorum is a subsidiary, agreed to pay $98.15 million to resolve multiple lawsuits alleging that the company knowingly billed government health-care programs for inpatient services that should have been billed as outpatient or observation services, according to the U.S. Department of Justice Office of Public Affairs.

That settlement also resolved allegations that one of CHS’ affiliated hospitals improperly billed Medicare for certain inpatient procedures and for services rendered to patients in violation of the Physician Self-Referral Law, commonly known as the Stark Law. It resolved lawsuits filed by several whistleblowers under the qui tam provisions of the False Claims Act that allows private parties to file suit on behalf of the government and obtain a portion of the government’s recovery, a Justice Department press report said.

One of the relaters in the CHS case was a former emergency room physician at CHS’s Longview Regional Medical Center in Longview, Texas.

Kalispell Regional Healthcare President Velinda Stevens, who died in January 2017 of breast cancer, was chief executive officer of Longview Regional Medical Center in the 1990s before she took the reins of Kalispell Regional. However, the federal government’s case against CHS that involved Longview Regional considered fraud allegations from 2005 through 2010 at 119 CHS hospitals, long after Stevens had left.

In Alderson’s whistleblower case, it took five years for the government to join the lawsuit. During that time, Alderson pored over boxes of cost reports as the government kept filing extensions to continue its investigation.

During an earlier Inter Lake interview, Alderson said it was “a huge sense of relief once the government joined.

“I was committed that I wouldn’t give up until everyone saw the documents. Then, if they saw the documents and didn’t come to the same conclusion, I could live with it.”

Features Editor Lynnette Hintze may be reached at 758-4421 or lhintze@dailyinterlake.com.