A mental health services company agreed yesterday to pay $7.8 million to resolve civil allegations that it defrauded Medicare and Medicaid, the U.S. attorney in Philadelphia announced.
Northwestern Human Services, a nonprofit corporation in Lafayette Hill, Pa., provided ''partial-hospitalization program'' treatment- to children and adults who were ineligible for Medicare and Medicaid services, government documents alleged.
The partial-hospitalization program is aimed at Medicare beneficiaries experiencing acute psychiatric or psychological problems that impair their ability to function normally.
Northwestern also faces two criminal counts of mail fraud.
"We all become victims when the Medicare and Medicaid programs are abused, but no group is more profoundly affected than the patients," said U.S. Attorney Patrick Meehan in a written statement. "In this case, the alleged fraud meant that people and, in many cases, children with serious emotional disorders weren't getting the treatment they needed and deserved."
The civil settlement resolved allegations that Northwestern billed for patients who were so impaired that they were unable to benefit from treatment; billed for recreational services; improperly or inadequately staffed programs; and submitted false records and staffing rosters to regulatory agencies.
The government alleged that from May 1996 to May 1997, Northwestern obtained more than $2.48 million from Medicare and Medicaid through fraudulently submitted claims. Northwestern agreed to a three-year corporate integrity agreement.
The settlement stems from a whistleblower lawsuit filed by John Hendricks, who will receive $737,000 from the recovery. Donald Burstein, M.D., a psychiatrist employed by Northwestern, pleaded guilty earlier to mail fraud relating to the civil whistleblower suit. If convicted of the criminal mail fraud charges, Northwestern faces a $1 million fine.
In 1998, HHS' inspector general announced a crackdown on partial hospitalization after numerous inspector general audits found widespread abuse of the program. In August 2000, University of Pennsylvania Health System became the first hospital to settle partial-hospitalization fraud charges, paying $12 million.
"Even though the company was not aware a (whistleblower case) was filed, (officials) had to know something was going on, and they've made significant changes and improvements in services," said Philadelphia healthcare lawyer Jeanne Damirgian.
Northwestern, which denied the allegations, operates more than 400 programs in 51 Pennsylvania counties, as well as in New Jersey, Virginia and Washington, and employs 6,500 people. The company, which is in the process of filing a plea agreement to the criminal charges, admitted some wrongdoing by a predecessor subsidiary, Northwest Center. M. Joseph Rocks, who was named Northwestern's chief executive officer in June 2000, said in a statement that the company acted in the spirit of full disclosure and cooperation with the Justice Department.
"We are very pleased this complex investigation has come to a close," Rocks said in a written statement. "The final settlement was a crucial part of our ongoing financial turnaround led by the new management team, which enables us to continue to do what we do best--provide a high quality of care to over 50,000 children and adults each day."
Peg Hutchinson, assistant U.S. attorney in Philadelphia who prosecuted the civil case, said this is the nation's second partial-hospitalization program settlement and the first in which criminal charges have been filed.