The Pennsylvania corporation that Mercy Health partnered with to develop a new Kent County psychiatric hospital paid $122 million a year ago to settle allegations of poor patient care and fraudulent billing to Medicaid and Medicare.
Mercy Health’s joint venture came together months after Universal Health Services Inc. settled 18 state and federal whistleblower cases in Pennsylvania, Georgia and Michigan. The settlement with the U.S. Department of Justice, Office of the Inspector General for the U.S. Department of Health and Human Services, and a number of state attorneys general, included a 53-page, five-year corporate integrity agreement.
As discussions began about a possible joint venture with Mercy Health, Universal Health Services was “really forthright and transparent” about the settlement that was publicly announced July 20, 2020, according to Dr. Matt Biersack, interim president at Mercy Health Saint Mary’s in Grand Rapids. The Detroit Free Press detailed the allegations in a lengthy story in May.
Mercy Health formed a joint venture in March with the for-profit Universal Health Services (NYSE: UHS) to develop an adult psychiatric hospital in southwest Kent County. Staff at the Michigan Department of Health and Human Services had earlier recommended awarding certificate-of-need (CON) approval to a Universal Health Services affiliate, Auburn Hills-based Havenwyck Hospital Inc., to develop the inpatient adult facility.
Havenwyck stands to secure CON approval over a competing proposal from Pine Rest Christian Mental Health Services, which is appealing the denial of its own proposal and Havenwyck’s recommended approval, claiming an error in the review process by department staff.
If Havenwyck wins the appeal and the staff recommendation stands, the joint venture would develop a 60-bed psychiatric hospital planned near Mercy Health’s Southwest Campus in Byron Center.
As part of the due diligence for forming the joint venture, issues surrounding the settlement were “vetted as part of our process and discussions,” Biersack said.
“We’re confident that they’re going to be fully compliant going forward,” Biersack said.
In announcing the settlement in July 2020, the Justice Department said allegations that Universal Health Services violated the federal False Claims Act involved claims of “billing for medically unnecessary inpatient behavioral health services, failing to provide adequate and appropriate services, and paying illegal inducements to federal healthcare beneficiaries” between January 2006 and December 2018.
“The allegations involved in this matter — inappropriate billing and inadequate care — have no place in our health care system. Behavioral health service entities must have strong mechanisms in place, including appropriate supervision and oversight, to avoid fraud and abuse in order to ensure they provide the level of care that their patients deserve,” William McSwain, the U.S. attorney for the Eastern District of Pennsylvania, said at the time. McSwain stepped down in January with the change in presidential administrations.
In its own announcement on the settlement, Universal Health Services said it “denies the allegations raised in this matter” and noted that “the settlement does not constitute a finding of improper conduct or failure to provide appropriate care and treatment in accordance with governing rules and regulations or an admission of facts or liability by the company or any of its subsidiary behavioral health facilities.”
The corporation agreed to the settlement “to avoid future distractions and the high costs of litigation, while ensuring that our focus remains steadfast on providing excellent care to our patients and their families.”
Inpatient capacity needed
The joint venture with Universal Health Services formed as Mercy Health was interested in expanding much-needed inpatient capacity for mental health care, Biersack said. That interest “grew into further conversations about strategic partnerships,” he added.
Participating in a joint venture “made sense,” Biersack said. Saint Mary’s has for years partnered with the Universal Health Services-owned Forest View Hospital, a psychiatric facility in Grand Rapids with 77 adult beds and 31 beds for children and adolescents.
The Universal Health Services settlement included claims in a December 2018 whistleblower lawsuit against Forest View, which named a new CEO in June 2020, a month before the settlement was publicly announced. Havenwyck Hospital in Auburn Hills and Cedar Creek Hospital in St. Johns were also part of the settlement, according to the Michigan Attorney General’s Office. Michigan’s share of the $117 million settlement was about $2.4 million.
Claims against the Michigan facilities included admitting Medicaid patients who were ineligible for inpatient or residential care, excessive hospital stays, failure to adequately train or supervise staff, billing for care that was not provided, and improperly using physical and chemical restraints and seclusion.
The first steps toward the joint venture with Universal Health Services (UHS) pre-dates Biersack’s appointment in March as interim president at Saint Mary’s, although “there was some introduction to the parent company as part of those conversations and discussions, and it just grew into further conversations about additional partnerships,” he said.
Given the well-established need for more inpatient psychiatric care, “it made sense for us to have a conversation around how we could partner on a joint venture and help address that larger community need,” Biersack said.
“UHS has long established that they have a national reputation for high-quality, evidence-based care, and it made sense to have a conversation with a partner that had expertise in that space,” he said. “What we realize on a day-in and day-out basis is that behavioral health needs of the community exceed the current infrastructure from an acute-care standpoint and an inpatient standpoint. So, we recognized that there was a need to really look outside of our walls in order to create the partnership that would help meet the extraordinary demand for inpatient services the greater Grand Rapids community has.”
Universal Health Services operates 26 acute care hospitals, 330 behavioral health facilities, and 41 outpatient and ambulatory care facilities in 37 U.S. states, Washington, D.C., Puerto Rico and the United Kingdom. The corporation’s hospitals include Forest View and four other facilities in Michigan.
The corporation is also partnering with Southfield-based Beaumont Health to develop and operate a new 150-bed, $40 million psychiatric hospital in Dearborn that’s expected to open this fall.
In greater Grand Rapids, Pine Rest’s appeal of the state Department of Health and Human Services could take months to complete. Meanwhile, Havenwyck Hospital on June 28 received final state approval for 24 geriatric beds at the new facility, in addition to the 60 adult inpatient beds it had already planned.
Biersack said Mercy Health remains confident that Havenwyck will secure final approval for the project that’s under appeal.
“We believe in the CON process and we think that there is a solid case on the Havenwyck application,” he said.
CORRECTION: This story has been corrected with the accurate title of Mercy Health’s partner, Universal Health Services Inc.