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New Jersey Hospital to Pay United States $7.5 Million
to Resolve Allegations of Defrauding Medicare

WASHINGTON – Raritan Bay Medical Center has agreed to pay the United States $7.5 million to settle allegations that it defrauded the federal Medicare program, the Justice Department announced today. The settlement resolves allegations that Raritan Bay, headquartered in Perth Amboy, N.J., improperly increased charges to Medicare patients in order to obtain enhanced reimbursement from Medicare.

In addition to its standard payment system, Medicare pays supplemental reimbursement to hospitals and other health care providers in cases where the cost of care is unusually high. These cases are known as “outliers.” Congress enacted the supplemental outlier payment system to ensure that hospitals possess the incentive to treat inpatients whose care requires unusually high costs.

The government alleged that, between January 1998 and August 2003, Raritan Bay 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.

“Today’s settlement sends a strong message that the Justice Department will not tolerate practices where hospitals and other health care providers knowingly overcharge the federal Medicare program,” said Peter Keisler, Assistant Attorney General for the Department’s Civil Division.

The civil settlement agreement resolves allegations against Raritan Bay that were filed in three separate federal lawsuits brought by whistleblowers under the federal False Claims Act. The Act permits private citizens to bring lawsuits on behalf of the United States.

As part of the $7.5 million settlement, the hospital entered into a Corporate Integrity Agreement with the U.S. 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.

“With the number of hospitals in New Jersey that serve populations dependent upon the federal health care programs, the integrity of the Medicare system is extremely important to our State,” said U.S. Attorney Christopher J. Christie. “This settlement demonstrates the cooperative efforts of several government offices to ensure the integrity of the Medicare system.”

The settlement with the medical center was the result of a coordinated effort among the Justice Department 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.