Stanford Hospital Accused of Alleged $468 Million Dollar Healthcare Billing Fraud; DOJ Filed its Second Statement of Interest in Federal Court

Stanford, CA, June 19, 2020 --(PR.com)-- The Department of Justice just filed its second Statement of Interest urging the Federal Court to rule against Stanford Health Care (formerly Stanford medicine, and Stanford Hospitals and Clinics).

The Complaint alleges that Stanford Health Care and its surgeons freely took advantage of a flawed medical payment system by habitually upcoding and unbundling major surgical codes as well as unbundling and charging exorbitant fees; Stanford University also collected money from Stanford Hospital through an undisclosed hefty slush fund entitled the "Dean’s Tax" and monetized Stanford Hospital’s new $2 billion dollar “corridor and arcade” which opened on November 17, 2019; Stanford executives and department managers pushed aggressive billing and maintained a culture of pushing profits at any cost regardless of the medical documentation and records; and Stanford also manipulated patient medical and nursing records to upcode time and units of exorbitant surgical supplies, many of which were never used.

The Complaint alleges that Stanford began the scheme on or about 2008 whereby they exploited a newly implemented “EPIC” electronic medical record system and fraudulently circumvented loopholes in medical billing. Stanford upcoded and unbundled services resulting in hundreds of thousands of unlawful health insurance claims and that Stanford egregiously instructed and required that its medical billers and coders always bill at the maximum level and fees, regardless of medical necessity, lack of substantiating medical records, and failure to adhere to national Correct Coding Initiatives. The complaint further alleges Stanford’s failure to mitigate or cease the conduct once put on notice and demanded to cease unlawful billing.

The lawsuit further alleges that Stanford knew they were submitting fraudulent claims and failed to correct their misconduct because they demonstrated repeated willingness to send refund check after refund check to certain patients multiple times in 2017 and 2018 for admitted unbundled and upcoded billings. The patients then made these refund checks available to the DOJ. Allegedly, Stanford would periodically unlawfully write off certain patient balances when the patients detected the upcoding and filed grievances.

The Federal lawsuit brought on behalf of the United States government against Stanford Hospital, captioned, United States vs. Stanford et. al. (Case No. CV 17-08726-DSF) (AFMx) is a live case in the Central District Federal Court. The lawsuit was filed on behalf of taxpayers as an under-seal Complaint. The lawsuit remained under federal court ordered seal from December 2017 to August 2, 2019 pursuant to 31 U.S.C. § 3279, which governs fraud against the government, as alleged here. FCA statutes allow private individuals to disclose to the government “original information” and allegations of fraud by contractors improperly receiving funds from the federal or state departments, and thus bring a “qui tam” claim on behalf of the government. Congress specifically designed the qui tam provisions to supplement the government’s resources with those of private parties called the relator.

The case alleges ongoing and institutional healthcare billing fraud by Defendants Stanford Hospital, Lucille Packard Children’s Hospital, Stanford Healthcare, and its surgeons including Dr. Frederick Dirbas (also doing business as “Software for Surgeons” in Menlo Park). Stanford Vice President and Healthcare Billing Compliance Officer Debra Zumwalt, also a Menlo Park resident, is a named Defendant in this case. She is alleged to be one of the masterminds behind Stanford’s healthcare schemes designed to maximize profits over safety. Ms. Zumwalt is concurrently a named Defendant in another, albeit unrelated, fraud action pending in the San Francisco State Court (CGC-18-565596), captioned, Devesa vs. Stanford-StartX Fund et. al.

The lawsuit alleges that Stanford and Stanford Healthcare are organized under IRS rules as purported not-for-profit organizations that pay no taxes. The suit alleges that Stanford collected more than $4 billion dollars of healthcare revenues in 2016 alone, and that Stanford’s tax returns show it nearly doubled its Medicare revenues from the government from 2012 ($460.4 million) to 2016 ($755.7 million).

According to a source involved in the investigation, Stanford Hospital's healthcare upcoding allegations have been authenticated by the government. The triable issues remain only as to determination of the total fraud on the government and treble damages (penalties) of approximately $10,000 for each false claim act by Stanford.

The Law Offices of Gloria Juarez represents the interests of the Relator, on behalf of the United States. Ms. Juarez's office has a special interest in prosecuting false claims act cases and uncovering Stanford Healthcare fraud.