In the second of what could be a series of hospital fraud settlements, a New York facility resolved civil whistle-blower allegations that it illegally paid a consulting firm for patient referrals. Mount Vernon (N.Y.) Hospital, a 167-bed, not-for-profit hospital located in Westchester County, agreed to pay $2.65 million to settle civil charges that it knowingly submitted millions of dollars in false claims to the state's Medicaid program between 1997 and 2004.
Another New York hospital settled similar False Claims Act allegations earlier this year in a lawsuit filed by the same whistle-blower.
Mount Vernon, part of the two-hospital Sound Shore Health System in New Rochelle, N.Y., allegedly paid Applied CaseManagement, New York, $60,000 per month in kickbacks for referring an average of 45 patients per month to its unlicensed detoxification unit. The hospital and Applied CaseManagement allegedly disguised what New York U.S. Attorney David Kelley, called a "sham consulting arrangement" as an administrative services contract to provide 22 different services, most of which the government contended were worthless or unnecessary.
Assistant U.S. Attorney Ramon Reyes, who prosecuted both cases, said Mount Vernon submitted substance-abuse treatment claims to New York Medicaid for services provided to patients whose referrals derived from illegal kickbacks in violation of state and federal laws. The U.S. attorney also alleged that the claims were false because Mount Vernon's detox unit was not licensed by the New York Office of Alcoholism and Substance Abuse Services.
In January, 238-bed Catskill Regional Medical Center, Harris, N.Y., paid $1.5 million to settle similar False Claims Act allegations that from 1997 to 2000 it also paid a consultant to obtain patients through illegal remuneration. Prosecutors said the substance-abuse programs at Catskill Regional and Mount Vernon paid for phony and unnecessary services to receive a stream of patients.
Both lawsuits were filed in 2000 in New York by John Reilly, a former employee of an Applied CaseManagement-related organization, AREBA-Casriel. In the Mount Vernon settlement, the hospital denied wrongdoing and settled to "avoid the delay, uncertainty, inconvenience and expense of protracted litigation." Mount Vernon also signed a five-year corporate integrity agreement with HHS' inspector general's office. Reilly will receive $530,000 from the Mount Vernon recovery and got $300,000 in the Catskill settlement.
There have been no civil or criminal settlements with Applied CaseManagement to date, and no criminal charges have been filed against any individuals in the case.
Reyes would neither confirm nor deny that other cases would be filed and Reilly attorney David Koenigsberg of Menz Bonner & Komar said he could discuss only the Mount Vernon case. Under the federal False Claims Act, whistle-blower lawsuits are filed under court-ordered seal. But Modern Healthcare has learned that lawsuits may be pending against Applied CaseManagement, whose officials could not be reached for comment, and at least one more hospital.
Clark Walter, general counsel for Sound Shore, said Mount Vernon officials don't believe they did anything wrong. He said the whistle-blower Reilly contacted the hospital in 1997 on behalf of Applied CaseManagement to solicit the hospital's business.
"The contract was reviewed by outside legal counsel," Walter said. "The company performed the services required -- training, scheduling and outreach -- and we paid them a monthly fee. Years later the whistle-blower and the company had a falling out and there was litigation between them."