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Could technology have prevented Carolinas HealthCare System’s $6.5 million lawsuit?

Healthcare facilities are required to accurately represent the services they are providing to patients

By Adrian Velasquez / Special to Healthcare Facilities Today


Due to overbilling practices, Carolinas HealthCare System (CHS) violated the False Claims Act and will pay a settlement of $6.5 million. Former CHS lab director Mark McGuire was the whistleblower in this case, contending that CHS was improperly upcoding urine drug test claims in an effort to receive higher payments, than if they properly billed for these tests. Under the False Claims Act, Mr. McGuire was able to file a lawsuit on the government’s behalf and potentially receive a portion of the recovery. As happened in this case, the government has an opportunity to intervene and take over the action. The government was able to conduct a thorough investigation into the allegations and reach a settlement.

Between 2011 and 2105, urine drug tests conducted by CHS were categorized as “high-complexity” tests, instead of with the “moderate complexity” code required by the Food and Drug Administration. This difference means around $80 more was charged for each test that was incorrectly coded at the higher payment. Josh Stein, North Carolina’s attorney general, made it clear that his office will not allow upcoding and called it “an unacceptable waste of taxpayers dollars.” He also noted that healthcare facilities are required to accurately represent the services they are providing to patients. The bottom line is that upcoding is unlawful and will not be tolerated.

Although Carolinas HealthCare System fully cooperated for more than two years with the government’s review of the allegations, they determined that is was in their best interest to resolve the issue and move on. CHS found that the lawsuit is really about their interpretation and application of the ever-changing and increasingly complex billing guidelines. Mr. McGuire will receive approximately $1.4 million from the settlement since the False Claims Act provision allows the person who blows the whistle to be awarded a portion of the settlement.

More and more Americans are already struggling with the rising costs of healthcare, making it imperative for healthcare organizations to ensure the accuracy of their medical billing. The CHS case and outcome should be an eye opener for any medical provider that is unfairly or unlawfully taking advantage of government healthcare programs.

Billing errors like these are not exclusive to Carolinas HealthCare System. In fact, four out of five medical bills in the United States are found to have minor mistakes at a minimum. These errors add up to $68 billion a year in needless healthcare expenses.

How could this extremely costly and continuous error be avoided? With the use of proactive technology, this expensive issue could have been averted. Due to the ever-evolving healthcare industry standards, it is critical for physician staff and doctors alike to receive much-needed training on new medical coding updates. This is a key component for correctly classifying and coding a patient’s diagnosis as well as the corresponding tests to ensure accurate payment.

One clear solution to this problem is for healthcare organizations, like CHS, to use risk-based auditing software. Oftentimes, hospitals spend millions of dollars to get to the root of coding issues and performing such a task takes more manpower than they have available. If healthcare facilities use technology to find “behavioral” coding issues, incorrect billing can be averted and millions of dollars will be saved. Healthcare networks that improve their internal processes with this specialized type of auditing software can modify their internal processes, identify red flags and dramatically improve their compliance risk, as well as their bottom line.

Adrian Velasquez is the co-founder of Fi-Med Management, Inc.



November 8, 2017


Topic Area: Information Technology


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