Department of Justice Seal Department of Justice
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Buyer Of Bayonne Hospital to Pay U.S. $2.5 Million
to Resolve Allegations of Medicare Fraud

WASHINGTON—The United States has agreed to settle for $2.5 million, plus interest, allegations that Bayonne, N.J., Medical Center defrauded the Medicare program, the Justice Department announced today. The settlement is with IJKG, LLC, the buyer of the hospital. Bayonne Medical Center is currently in bankruptcy.

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 2000 and August 2003, Bayonne 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.

In 2007, Bayonne Medical Center filed for bankruptcy under Chapter 11 of the Bankruptcy Code. As part of the proposed reorganization, IJKG, LLC agreed to purchase the hospital’s assets and to settle the United States’ claims against the hospital.

“Today’s settlement demonstrates that the United States is determined to protect the Medicare program against hospitals and other health care providers who overcharge for their services,” said Jeffrey S. Bucholtz, Acting Assistant Attorney General for the Department’s Civil Division.

The civil settlement agreement released today resolves allegations against Bayonne that were filed in a lawsuit brought by a whistleblower under the federal False Claims Act. The False Claims Act permits private citizens, known as relators, to bring lawsuits on behalf of the United States. Under the settlement, James Monahan, the relator in the lawsuit, will receive $400,000.

The settlement with Bayonne was the result of a coordinated effort in investigating and resolving the allegations 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 Department of Health and Human Services, Office of the Inspector General and Office of Counsel to the Inspector General; the Centers for Medicare and Medicaid Services; and the Federal Bureau of Investigation.