Mercy Hospital in Portland has agreed to pay $1,514,000 to settle allegations that it violated federal and state false claims laws by overbilling Medicare and Medicaid for urinalysis drug-screening tests.

Those tests were ordered and performed at the former Mercy Recovery Center in Westbrook from 2011 to 2013, according to documents filed in federal court. Mercy Hospital, located at 144 State St., was acquired in October 2013 by Eastern Maine Healthcare Systems.

“The conduct the complaint describes occurred prior to Mercy joining EMHS. When EMHS became aware of the conduct it ceased,” Mercy Hospital said in a statement released Wednesday night through its spokesman, Ed Gilman. “Mercy and EMHS cooperated completely with the government’s investigation. The billing manager who was primarily responsible is no longer employed by Mercy/EMHS.”

The settlement agreement, which was announced Wednesday in a statement issued by U.S. Attorney Halsey B. Frank, avoids what court documents predicted could have been “protracted litigation.” Court records also point out that once the false billing was detected, Mercy Hospital cooperated with the investigation.

Frank said the settlement will resolve allegations that Medicare and MaineCare, Maine’s Medicaid program, were overbilled for urinalysis drug screening tests conducted at Mercy Recovery Center.

Mercy closed the substance abuse recovery center in May 2015, in part because of low reimbursement rates for addiction services. Most of the 250 clients served at the Westbrook facility were being treated for opioid addiction.


Frank said the federal government alleged that Mercy falsely used a billing modifier code that enabled the recovery center to bill Medicare and MaineCare for multiple urinalysis drug screening tests performed the same day on the same patient.

“The urinalysis drug screening tests should have been bundled and billed as one claim per each single patient encounter. Instead, Mercy separately billed for the urinalysis drug screening tests on a per test basis. As a result, Medicare and MaineCare overpaid Mercy on multiple claims,” Frank said in his statement.

Medicare and MaineCare pay for bundled claims at a lower rate. The incorrect billing practice was used for about 85 percent of Medicare urinalysis drug screen tests and 65 percent of MaineCare tests. Frank said Mercy Hospital implemented “enhanced internal compliance measures” in response to the overbilling issue.

The complaint filed in U.S. District Court in Portland states that federal and state officials received an anonymous tip in April 2013 alleging that Mercy was engaging in a potentially fraudulent test-billing system. The complaint says Mercy “habitually” used an improper billing code for drug-testing urinalysis that allowed it to receive “substantial overpayments from Medicare and MaineCare to which it was not entitled.”

The case was investigated by the Office of the Inspector General for the federal Department of Health and Human Services.

Dennis Hoey can be contacted at 791-6365 or at:

[email protected]

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