Cayuga Medical Center, a 209-bed hospital in Ithaca, N.Y., will pay about $3.6 million to settle False Claims Act allegations (PDF) with the U.S. attorney in upstate New York.

The U.S. attorney's office in Syracuse alleges that the hospital had “improper physician recruitment agreements” with some referring physicians, and then submitted those false claims to Medicare and Medicaid from July 2004 to December 2006.

Dr. Daniel Jorgenson, a plastic surgeon who had practiced in Ithaca, filed the lawsuit. He had alleged that Cayuga Medical Center paid for disallowed expenses, improperly extended a recruitment agreement, and submitted false claims to Medicare and Medicaid.

Cayuga Medical Center did not admit wrongdoing in the settlement. Calls to the hospital were not immediately returned.

According to the U.S. attorney's news release (PDF), Cayuga Medical Center voluntarily disclosed additional recruiting agreement that did not comply with the Stark Law. The hospital had financial relationships with seven local physicians, including Jorgenson, who did not meet the Stark Law exception for recruitment arrangements, according to the settlement.