Two related New York City consulting firms accused of referring substance-abuse patients to local hospitals in exchange for kickback payments agreed to pay $2.75 million to resolve those civil allegations, the U.S. attorney in New York announced today. Applied Consulting and a sister company, Applied Case Management, agreed to the settlement without admitting wrongdoing. The companies allegedly funneled patients to three New York hospitals through a series of illegal patient-referral schemes, then billed New York's Medicaid program for the alleged false claims.
In its complaint, the government alleged that starting in 1997, the firms signed contracts with 167-bed Mount Vernon (N.Y.) Hospital, 238-bed Catskill Regional Medical Center, Harris, N.Y., and 336-bed Cabrini Medical Center, New York, in which kickback payments for patient referrals were disguised as "administrative service contracts." The hospitals allegedly paid the firms $50,000 to $70,000 per month to provide 22 administrative services to hospital alcohol- and substance-abuse programs that included patient referrals. Earlier this year Mount Vernon and Catskill Regional paid a combined $4.15 million to settle similar allegations filed by whistleblower John Reilly. Calls to Applied Consulting for comment were not returned at deadline, but in the 76-page settlement agreement the company said it settled "to avoid the delay, uncertainty, inconvenience and expense of protracted litigation." -- by Mark Taylor