Staten Island (N.Y.) University Hospital and its community-health subsidiary agreed to pay the state $76.5 million to settle Medicaid false-billing charges and meet strict compliance and corporate integrity standards. The settlement, to be paid in installments through 2017, is among the largest Medicaid settlements ever. The university hospital will appoint a corporate compliance officer with wide-ranging powers and prohibit board members from having financial or employment relationships with any part of the organization. "We deeply regret and are embarrassed by the misconduct carried out by former executives of the hospital that led to this settlement," hospital officials said in a news release. "We pledge to adhere to business and corporate governance reforms and practices that will be a national model for compliance and business ethics in the healthcare field." The former executives were not charged as defendants. A spokeswoman for New York Attorney General Eliot Spitzer said the settlement resolved all civil and criminal liability in the case from the attorney general's perspective but she could not speak for other regulatory agencies.
Spitzer accused the university hospital of taking advantage of a state Medicaid program designed to encourage providers to operate in medically underserved areas. The program pays a premium to satellite clinics in underserved neighborhoods that are open fewer than 60 hours per month. Spitzer alleged that despite warnings from its outside lawyers and state officials, the university hospital in 1999 began operating more than 21 of its satellite clinics up to 200 hours per month, falsified cost reports and lied to state agencies to receive higher reimbursement. According to Spitzer, the hospital launched the scheme even as it was negotiating with the attorney general to settle different billing charges for $45 million in restitution and $39 million in promised free care. -- by Mark Taylor