Stanford Healthcare Loses in Appeals Court, Accused of Alleged $468 Million Dollar Healthcare Billing Fraud

Palo Alto, CA, January 05, 2021 --(PR.com)-- The Ninth Circuit Court of Appeals recently rejected Stanford Healthcare’s (formerly Stanford Hospitals and Clinic) argument in the U.S. government’s case against Stanford Healthcare for nearly $500 million dollars of alleged Medicare billing fraud. In entering its ruling against the healthcare company, the court struck Stanford's argument on the critical motion.

The Federal False Claims Act Complaint against Stanford Hospital and Stanford Healthcare was filed in December of 2017 in Federal Court. The Complaint alleges Stanford misused its “Epic” electronic records system which allowed Stanford to schematically alter and adulterate health and billing records without detection.

The Complaint alleges: Stanford Hospital executives participated in healthcare fraud which included upcoding and unbundling to obtain payments; Stanford University had a fee-sharing agreement with Stanford Hospital called the “Dean’s tax” slush fund to monetize Stanford Hospital’s new “corridor and arcade” which opened in late 2019; to do so, Stanford executives deputized division chiefs and billing managers, who pressured physician colleagues to submit the maximum level billing codes regardless of controverting medical records and necessity, for more lucrative codes than they were otherwise lawfully entitled.

The Complaint further alleges: Stanford also manipulated patient medical and nursing records to falsely bill, upcode time units, and upcode units of exorbitant surgical supplies - many of which were never used.

The Complaint alleges: Stanford exploited a newly implemented “Epic” electronic medical record system to fraudulently circumvent loopholes in medical billing; they “upcoded and unbundled” services resulting in hundreds of thousands of unlawful health insurance claims; Stanford completely disregarded numerous red flags identifying these widespread coding failures and the resulting overpayments that followed.

Stanford’s alleged “shut down” tactics through this time are alleged to have included “cattle prodding”, security threats, and up to termination of employees, agents, and doctors who “sounded the alarm” as to their conduct. Multiple wrongful termination lawsuits for whistleblowing employees against Stanford Hospital and Stanford University have been filed Young vs. Stanford (RG17-877055) in the Alameda County Superior Court, Gaines vs. Stanford (3-16-02381) in California Federal Court, and others. It is through the dedication and integrity of a number of courageous whistleblowers that Stanford’s alleged ongoing healthcare fraud has been detected and reported through false claims act attorneys like Ms. Gloria Juarez to the government.

The Complaint alleges: Stanford division chiefs and physician champions at Stanford prodded their subordinates to just “CLICK, CLICK, CLICK, CLICK, CLICK” referring to misuse of Stanford’s electronic medical records in order to obtain the highest-level codes and payments. Stanford also regularly distributed billing “cheatsheets” to its billers, which required billers to code maximal and bill high, regardless of Stanford’s habitual refusal to comply with proper billing laws.

The suit further alleges: 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 from 2017- 2018 for admitted unbundled and upcoded billings; Stanford would periodically unlawfully write off certain patient balances when the patients detected the upcoding and filed grievances; Stanford’s’ readiness to unlawfully “write off” thousands of dollars of patient balances and disputed charges for upcoded billings was also important here in elucidating their sophisticated fraud schemes.

The Federal lawsuit brought on behalf of the United States government against Stanford Hospital is captioned United States vs. Stanford et al. 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. 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 whistleblower is entitled to share in the government’s recovery, up to some 25 to 30% of what is recovered.

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. Interestingly, Ms. Zumwalt is concurrently a named Defendant in another albeit unrelated “fraud” action in the San Francisco State Court CGC-18-565596 captioned Devesa vs. Stanford-StartX Fund et. al.

Stanford and Stanford Healthcare are organized under IRS rules as purported not-for-profit organizations who pay no taxes. The lawsuit alleges 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) without an explainable, reasonable, or proportionate increase in expenses or overhead. Allegedly, to the contrary, Stanford has also forced furloughs and steep pay cuts to its non-physician medical staff salaries by some 20% citing “COVID-19” losses, while remaining one of the top 5 most profitable hospitals in the U.S.

The Law Offices of Gloria Juarez is a Los Angeles and Orange County Firm which represents taxpayers against fraud, and here they represent the government’s Relator against Stanford.