2023 Board Resources

EXECUTIVE SUMMARY OF U.S. EX REL. CECILIA GUARDIOLA V. BANNER HEALTH AND NCMC, INC.

The Qui Tam Allegations and the Settlement Ms. Cecilia Guardiola filed a Qui Tam complaint against Banner Health (Banner) under seal on November 27, 2013, but it was not until November 2014 that Banner became aware of the matter. After that time, Banner received two subpoenas from the Department of Justice (DOJ) requesting (1) documents and information concerning 50 cardiac cases (half were zero to one-day stays, or “short stays”) at Banner Boswell, and (2) documents and information concerning 150 short stays at nine Banner hospitals. These short stays occurred from 2009 to the end of 2015 and involved 94 Diagnosis Related Groups (or DRGs). Thereafter, on February 9, 2016, Banner received a redacted copy of the Qui Tam complaint underlying the investigation. The redacted sections removed all identifying references to Ms. Guardiola. There were three primary allegations in the complaint: (1) Banner Boswell and Banner Del Webb mischaracterized patients as “urgent” instead of “elective,” to avoid being reviewed by Noridian so they would be paid; (2) Banner billed for outpatient services as inpatient services for higher payment; and (3) Banner inflated the number of hours patients received outpatient observation services in connection with surgeries or procedures to be paid more on the cost report. Outside counsel and Banner’s Chief Compliance Officer met with the DOJ on August 30, 2016. At this meeting, the DOJ informed Banner that they had reviewed the 150 cases requested in the second subpoena and had arrived at an error rate and an extrapolation which resulted in an overpayment calculation of $107M, before adding a multiplier or potential penalties. Banner met again with the DOJ on March 3, 2017 to provide Banner’s response to their overpayment determination. The response focused on three areas: (1) Banner’s history of compliance efforts to meet the regulatory requirements surrounding inpatient and observation patients; (2) the specific patients’ medical records and Banner’s agreement or disagreement on their inpatient or outpatient status determination; and (3) the statistical issues with their population selection, their sampling process, and their extrapolation methodology. On April 13, 2017, the DOJ responded by offering to settle the Qui Tam for $15.3M, a reduction of $91.7M from the prior amount. After several exchanges, on May 25, 2018, Banner expanded the settlement to cover all the investigated DRGs, the Banner hospitals implicated by the complaint 1 , and a tail period to the end of 2016. These inclusions increased the settlement amount to $18.3M, plus interest.

1 Banner Baywood Medical Center, Banner Heart Hospital, Banner Boswell Medical Center, Banner Del. E. Webb Medical Center, Banner Desert Medical Center, Banner Estrella Medical Center, Banner Gateway Medical Center, Banner University Medical Center Phoenix, Banner Ironwood Medical Center, Banner Thunderbird Medical Center, North Colorado Medical Center, and McKee Medical Center.