BRADENTON, Fla. - Shands Healthcare at the University of Florida notified bondholders that it has agreed to pay $26.2 million to settle allegations under the False Claims Act due to overpayments by Medicare and Medicaid.

"Payment of this settlement amount will not have a material impact on our financial position, key financial metrics, or our results of operations," the teaching hospital's notice said.

The payment, also revealed in public releases by Shands and the Department of Justice, settles a whistleblower lawsuit filed in 2008 by an independent contractor that was hired to audit Shands' billing practices between 2003 and 2008.

The existence of the suit in court records was made available to the public for the first time on Aug. 19.

"Allegedly, from 2003 through 2008, [Shands] six hospitals knowingly submitted inpatient claims to Medicare, Medicaid and TRICARE for certain services and procedures that Shands Healthcare knew were correctly billable only as outpatient services or procedures," the justice department said. TRICARE is a health care program for active and retired service members and their families.

Over the five years that it took to reach a settlement in the federal case, the healthcare system saved the funds necessary to cover the payment, Shands spokeswoman Melissa Blouin confirmed Thursday.

In 2012, the federal government paid $15 million to Shands for underpayment of Medicare and Medicaid claims, she said.

The whistleblower case uncovered billing irregularities in which the hospitals under Shands, including its flagship facilities in Gainesville and another in Jacksonville, billed Medicare and Medicaid for short overnight inpatient admissions rather than for less expensive outpatient or observation services.

In each case of alleged overbilling, the patient received all services ordered, Shands said in its press release.

"Shands strives to comply with government regulations and has conscientiously worked to create and operate an appropriate, fair, and accurate billing system for all payers," the health system's bondholders notice said.

It also said that changes to practices and procedures have included improvements to case management protocols with an improved team approach to accurately assess and code the care provided to patients. The system has also improved software, implemented new procedures, provided supplemental employee training, and hired advisors to help assess coding.

Shands told bondholders there was "no intentional misconduct or callous disregard" by the health system.

The False Claims Act permits private citizens to sue on behalf of the government and receive a portion of any settlement or judgment. The lawsuit against Shands was filed by Terry Myers, president of the healthcare consulting firm YPRO Corp., which Shands hired to do the billing audit. The amount Myers will receive was not released.

Though the Justice Department said Shands' settlement was reached with no admission of liability, U.S. Department of Health and Human Services Inspector General Daniel Levinson described the false claims as "schemes to siphon off crucial health care dollars" that will be brought to justice.

Shands has about $484 million of outstanding debt, which includes bond and nonrated private placements and loans with various banks, according to a Feb. 25 report by Moody's Investors Service.

The bonds are rated A2 by Moody's and A by Standard & Poor's.

Most of the health system's bonds are issued by the Alachua County Health Facilities Authority.

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