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Former ER Nurse Loses Her Whistleblower Suit Against Lawrence Memorial Hospital

Susie Fagan
KCUR 89.3
Nonprofit Lawrence Memorial Hospital, which is community-owned, was founded in 1921.

A former emergency room nurse at Lawrence Memorial Hospital has lost her whistleblower suit alleging the hospital falsified patient records to obtain higher Medicare and Medicaid reimbursements.

A federal judge on Tuesday ruled that Megen Duffy failed to prove an essential element of her claims, namely that the allegedly false data had an effect on how much the government paid the hospital.

Duffy worked as a registered nurse at the hospital from August 2009 until she was fired in October 2013 for allegedly threatening another employee. In her lawsuit, she alleged her termination was fabricated.

Lawrence Memorial Hospital termed her lawsuit “baseless” and claimed it violated the terms of a settlement the hospital reached with Duffy after she was fired.

Russell W. Johnson, the hospital’s president and CEO, told KCUR that the lawsuit’s outcome “reflects what we’ve known all along – that we do follow Medicare guidelines and that we do provide services in ways that are consistent with those guidelines.”

Johnson said the lawsuit “was really more a result of a personnel issue than a real transgression by the hospital. And that came out in this judgment.”

The hospital, he added, had spent more than $500,000 in legal fees and expenses – over and above its insurance coverage – defending the suit.

“In fact, I’ve got a legal bill in my inbox this month, and for the Duffy case it was $48,900,” Johnson said.

Lawrence Memorial Hospital was founded in 1921 and is licensed for 176 beds. The not-for-profit hospital is led by a nine-member board of trustees appointed by the mayor and confirmed by the Lawrence City Commission. Although it’s community owned, it gets no tax subsidies from the city of Lawrence or from Douglas County.

Sarah A. Brown, one of Duffy’s attorneys, said she was assessing her client’s options, including a possible appeal.

“We believe there was evidence in the record that showed how these manipulations affected reimbursement rates,” Brown said. “So we’re going to need to evaluate whether we want to point that out to the court or point it out on appeal.”    

In her lawsuit, Duffy alleged that emergency room personnel at Lawrence Memorial were instructed to alter the arrival times of possible heart attack patients to coincide with timestamps automatically generated when patients were connected to electrocardiogram monitors.

That would have significantly improved the hospital’s performance data and qualified it for higher incentive payments from the government.

In his ruling tossing out the lawsuit, U.S. District Judge Sam Crow found that Duffy failed to show the allegedly inaccurate arrival time data had affected the government’s reimbursement decisions.

Duffy’s lawsuit, which sought triple damages under the federal False Claims Act, was filed under seal in May 2014. The Justice Department declined to intervene and the case was unsealed in 2015.

Under the False Claims Act, private citizens can bring lawsuits on behalf of the United States if they have reason to think the defendant knowingly submitted fraudulent claims to the government.

The Department of Justice is required to investigate the allegations and then decide whether to intervene in the case, decline to intervene or, in rare cases, seek the case’s dismissal.

The Department of Justice intervenes in fewer than a quarter of all False Claims Act cases, sometimes because it doesn’t have the resources to pursue them. Once the department declines to intervene, the person who brought the case can pursue it on his or her own, although the government often asks that it be kept apprised of filings in the case. The plaintiff is entitled to anywhere between 25 percent and 30 percent of any recovery.

Dan Margolies is a senior reporter and editor at KCUR. You can reach him on Twitter @DanMargolies

Dan Margolies has been a reporter for the Kansas City Business Journal, The Kansas City Star, and KCUR Public Radio. He retired as a reporter in December 2022 after a 37-year journalism career.
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