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New Jersey Hospital to Pay U.S. $7.5 Million to Resolve Allegations of Medicare Fraud

WASHINGTON & NEWARK, N.J .– Warren Hospital in Phillipsburg, N.J., has agreed to pay the United States $7.5 million to settle allegations that it defrauded Medicare, the Department of Justice announced today. The settlement resolves allegations that the hospital improperly increased charges to Medicare patients in order to obtain enhanced reimbursement from Medicare.

In addition to its standard payment system, Medicare provides supplemental reimbursement, called outlier payments, to hospitals and other health care providers in cases where the cost of care is unusually high. Congress enacted the supplemental outlier payment system to ensure that hospitals possess the incentive to treat inpatients whose care requires unusually high costs.

The Justice Department alleged that, between January 1999 and August 2003, Warren purposefully inflated charges for inpatient and outpatient care to make these cases appear more costly than they actually were, and thereby obtained outlier payments from Medicare that it was not entitled to receive. The settlement also resolves claims that the hospital violated Medicare’s anti-self-referral statute, known as the Stark law, which prohibits claims for Medicare patients referred by physicians with whom a hospital has an unlawful financial relationship.

“Today’s settlement demonstrates that the Department of Justice is committed to protecting the Medicare program from overcharging and to assuring that patients receive medical care only on the basis of their actual medical need,” said Jeffrey S. Bucholtz, acting Assistant Attorney General for the Department’s Civil Division.

The civil settlement agreement resolves allegations against Warren that were filed in two separate federal lawsuits brought by “whistleblowers” under the federal False Claims Act. The False Claims Act permits private citizens to bring lawsuits on behalf of the United States. Under the settlement, Peter Salvatori and Sara Iveson, the relators in the first of the two lawsuits filed against Warren, will share 16 percent of the total recovery, or $1.2 million.

United States Attorney Christopher J. Christie said, “The Medicare system is of great importance within New Jersey, and this settlement shows a concerted and coordinated government effort to ensure its integrity.”

Warren has also entered into a Corporate Integrity Agreement with the United States Department of Health and Human Services, Office of Inspector General. The Corporate Integrity Agreement contains measures to ensure compliance with Medicare regulations and policies in the future.

The settlement with Warren was the result of a coordinated effort by the Justice Department’s Civil Division, Commercial Litigation Branch; the U.S. Attorney’s Office for the District of New Jersey, Affirmative Civil Enforcement Unit; the U.S. Attorney’s Office for the Eastern District of Pennsylvania; the Department of Health and Human Services, Office of Inspector General and Office of Counsel to the Inspector General; the Centers for Medicare and Medicaid Services; and the Federal Bureau of Investigation, in investigating and resolving the allegations.