A prestigious Chicago medical institution that turned itself in to the government for allegedly misusing federal grant money for cancer research has paid a $250,000 fine to settle the charges.
The case, believed to be only the second of its kind, signals a new target of federal healthcare fraud investigators: recipients of hefty government grants for medical research.
The University of Chicago and a former medical professor have agreed to pay a total of $650,000 to settle charges that they misspent federal grant money for cancer research.
Under the settlement, the university and George Wied, M.D., a former professor of obstetrics, gynecology and pathology, don't admit to any violation of federal law.
The university paid $250,000 and Wied paid $400,000 to settle a False Claims Act lawsuit the federal government filed two years ago in U.S. District Court in Chicago.
Wied was terminated from his position at the university sometime after the lawsuit was filed, according to the U.S. attorney's office in Chicago, which handled the case.
The lawsuit alleged the university, which runs 526-bed University of Chicago Hospitals, and Wied spent nearly half of $1.9 million in grant money from the National Institutes of Health for salaries, computer maintenance, telephone charges and equipment. The seven-year grant, which the university and Wied received in 1986, was supposed to be used to create a computer-based system that would help in diagnosing cervical cancer.
It's not known whether the system was ever completed. University officials did not return repeated phone calls for comment.
In 1991 an internal audit by the university revealed the salaries of one or more university employees might have been improperly charged against Wied's grant account between September 1986 and June 1993. The dean of the University of Chicago Medical School, Samuel Hellman, M.D., alerted the NIH to the audit's results, the lawsuit said.
A later audit report by an outside law firm found numerous instances of misapplication of grant funds. Stalled negotiations to settle the matter prompted the government to file suit in federal court.
The settlement resolving the charges was signed by the parties last November. MODERN HEALTHCARE obtained a copy of the settlement last week under the federal Freedom of Information Act.
The allegations and settlement might be particularly embarrassing to University of Chicago Hospitals, which has launched an intensive marketing and advertising campaign in the Chicago area that touts the facilities' clinical acumen in treating serious illnesses like cancer.
Assistant U.S. Attorney Linda Wawzenski, who handled the case for the government, credited the university with bringing the error to the feds' attention and fully cooperating with the investigation.
"There's still some responsibility on (the university's) part," Wawzenski said. "The way the grant was dispersed through the university, it was put into the hands of the physician without any oversight."
As part of the settlement, the university also agreed to take actions over the next three years to improve its policies and procedures in the management of federal grant funds.
The University of Chicago is only the second medical institution known to have settled healthcare fraud charges alleging misuse of federal grant money. In April 1997 New York University Medical Center paid $15.5 million to resolve similar charges.