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Lawsuits target hospitals: The class-action claims allege kickback schemes

Rochester Business Journal
May 23, 2014

Two class-action lawsuits accuse five Rochester-area hospitals and their third-party records management firms of illegally overcharging patients for copies of medical records.

The allegation of overcharging, first made in a lawsuit against Strong Memorial and Highland hospitals, other University of Rochester Medical Center services and Colorado-based Verisma Systems Inc., was repeated this week in a separate action against Rochester General, Unity and F.F. Thompson hospitals and their records provider, HealthPort Technologies LLC of Alpharetta, Ga.

Filed May 14 and May 20 in U.S. District Court in Rochester, the Verisma and HealthPort lawsuits are jointly handled by Faraci Lange LLP, a local firm, and Nichols Kaster PLLP. Nichols Kaster has offices in Minneapolis and San Francisco and specializes in consumer rights and whistleblower cases.

Most of the region’s health care is provided by the Rochester hospitals and the URMC-owned F.F. Thompson in Canandaigua, along with their parent systems’ owned and affiliated medical practices, nursing homes and other organizations.

The fee of 75 cents a page that Verisma and HealthPort charge to fulfill patients’ and providers’ requests for copies of patient records violates New York’s Public Health Law and the state’s business laws, the court actions maintain.

Claiming that Verisma and HealthPort pass part of the copying fees they collect back to the hospitals, the filings accuse URMC, the hospitals and the medical records firms of violating the law by cooperating in a kickback scheme.

Officials of the hospitals, however, denied getting any money back from either records firm.

No such scheme was ever part of its deal with Verisma, said URMC spokeswoman Teri D’Agostino.

The medical center uses the Colorado company to retrieve patient records but has never taken a cut of Verisma’s fees and had no say in determining those fees, she added.

URMC contracted with Verisma not to reap a profit but because the medical records specialist could respond to requests more quickly than URMC’s medical records staff, D’Agostino explained.

That the state’s fee schedules were devised in the days of manual copying and “may not accurately reflect the cost of replicating records in the era of electronic medical records” was a concern URMC raised with Verisma when it contracted with the Colorado firm, D’Agostino added.

Thompson Health spokeswoman Anne Johnston echoed D’Agostino.

“Thompson Health has not received any monies in return from HealthPort for its medical record copying services. HealthPort professionally handles this service for Thompson Health with the expectation that HealthPort is complying with all applicable laws,” Johnston said in an email.

Unity Hospital likewise gets no money back from HealthPort, spokeswoman Natalie Ciao said.

Rochester General also takes no money from the Georgia firm, hospital spokesman Marty Aarons said.

When URMC hired Verisma, D’Agostino wrote in an email, “we did so with the understanding that Verisma complied fully with appropriate billing procedures. We would refer you to them for further explanation of their practices.”

Verisma officials did not respond to a request for comment.

HealthPort and three prominent New York City hospitals are fighting a class action similar to the Rochester cases.

The downstate case was filed March 12 in state Supreme Court and removed to a federal court in Manhattan by HealthPort in April. Three New York City firms—Simonson, Hess, Leibowitz & Goodman P.C., Dentons US LLP and Widowski Law Group LLP—represent plaintiffs in that case.

In a court document in the New York City case, HealthPort lawyer Rebecca Brazzano of Thompson Hine LLP in Washington, D.C., maintains that her client’s copying fees do not violate state law. Arguing in the filing that the New York City plaintiffs have suffered no harm, Brazzano calls for the case to be thrown out.

The fee that HealthPort and Verisma allegedly charge to supply patient records is the maximum allowable under New York’s Public Health Law.

But while the statute allows charges of up to 75 cents a page, it requires record providers to charge no more than their actual cost. To electronically retrieve and transmit records, HealthPort and Verisma spend a fraction of the fees they charge, the Rochester lawsuits claim.

The initial plaintiffs in the Verisma action are six Highland Hospital and Strong Memorial patients who submitted record requests through their lawyers; they were charged 75 cents a page and $159.75 to $609 in total.

Seven patients who collectively paid $2,386.25 to retrieve copies of their records from Rochester General, Unity or F.F. Thompson are the initial plaintiffs in the HealthPort suit.

The lawsuits seek recovery of allegedly overcharged amounts, additional statutory damages in an unstated amount plus attorneys’ fees and court costs. They do not say how much less than the 75 cents the plaintiffs should have paid, but they cite a provision of New York’s General Business Law to demand that any damages awarded be tripled.

If a judge approves the law firms’ requests for class-action status, anyone who obtained copies of medical records from the targeted organizations for six years prior to the HealthPort and Verisma complaints’ filing dates would be eligible to join the cases, the filings state.

The actions allege that Verisma and HealthPort promise hospitals financial gains for using their records services and deliver on that promise by artificially inflating copying fees to reap illegal profits. Plaintiffs allege that by splitting illegal medical records gains with hospitals, the records firms are bribing the hospitals to use their services.

“Kickbacks are a central component of Verisma’s marketing strategy,” the complaint against URMC alleges.

“(URMC) never took a penny from Verisma,” D’Agostino said in an interview.

5/23/14 (c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.



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