Catholic system settles case
* Catholic Health East, Newtown Square, Pa., became the second health system to settle an Internal Revenue Service examination of its bonds, signing an agreement earlier this month that preserves the bonds' tax-exempt status and doesn't require the Roman Catholic system to pay a fine. The IRS had been reviewing $362.3 million of bonds issued in 1998 to finance a merger. The bonds were part of a $1 billion tax-exempt financing. The closing agreement recognizes that the bonds were for acquisitions rather than refundings, which are subject to more tax restrictions, and that the accounting used in the deal followed IRS requirements, said CHE counsel John Cross III, a partner at the Hawkins, Delafield & Wood law firm in Washington. In June, MedStar Health, Columbia, Md., agreed to pay $500,000 to resolve a 3-year-old audit of its bonds. Five other systems with bonds under IRS review have been working on settlements.
Medicare fraud alleged
* A contractor said last week that Washington officials hid $200 million in Medicare and Medicaid payments to the former District of Columbia General Hospital and as a result cheated the firm out of $20 million. The city's only public, acute-care hospital shut down inpatient services more than a year ago. In a lawsuit filed in Superior Court in Washington, the contractor, Davis & Associates, Lanham, Md., charged that the city intentionally diverted the revenue. Davis & Associates was hired in April 2000 to review the hospital's Medicare and Medicaid cost reports for fiscal 1999. In return, the firm said, the city promised it 10% of the revenue recovered. The company is asking for $25 million in punitive damages as well as the $20 million it said it is owed. "It's a little too late for that," said Tony Bullock, spokesman for Washington Mayor Anthony Williams, who was named in the lawsuit. He said the hospital was shut down because its governing body "ran it into the ground" and the alleged claims were either not paid properly or were never filed.