May 25, 2010, 06:00:00AM. By Charles Benson

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Washington, D.C.: Nine hospitals in seven states, many of which were named in a 2008 qui tam lawsuit, will pay a combined total of $9.4 million in settlement money for a whistleblower suit alleging that the healthcare providers committed Medicare fraud.

In an official statement from the US Department of Justice, the hospitals are accused of keeping patients overnight after having kyphoplasty, which is typically considered an outpatient procedure, in order to further bill Medicare providers at an advanced rate.

Seven of the nine hospitals were named in a 2008 qui tam suit also involving kyphoplasties performed by Medtronic Spine, which netted the government roughly $20 million in recovered funds. Medtronic paid $75 million to settle a separate 2008 case in which the company was accused of defrauding Medicare by counseling healthcare providers to to perform kyphoplasties on an inpatient basis.

Attorneys for the government believe that the two unnamed hospital employees who brought the fraud to light were essential to ending the shady practice.

"If it hadn't been for our two whistleblower clients, the government would have been unlikely to have found out what these hospitals were doing," said Matthew Smith, a lawyer who worked on the case. "Once we filed a qui tam lawsuit and our clients explained to the US attorney's office in Buffalo how Medicare was being cheated, the government quickly investigated the allegations and has aggressively taken steps to recover funds the Medicare program needs to cover legitimate healthcare costs."

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