Benton J. Campbell, United States Attorney for the Eastern District of New York, announced that Victory Memorial Hospital (“Victory Memorial”) has agreed to a settlement with the United States of at least $2.3 million to resolve claims that the hospital defrauded the Medicare program, as well as claims stemming from a Medicare overpayment to the hospital. In accordance with the settlement agreement, the total settlement of the fraud claims could approach a total of $2.8 million, depending on whether any Medicare underpayments exist in connection with certain annual filings, known as Cost Reports, that the hospital submitted to Medicare for 2007 and 2008.

The government’s investigation began after Joseph Lee, a former employee of Victory Memorial, filed a civil complaint pursuant to the federal False Claims Act. Under the Act, a private individual who has uncovered fraud against the government may file a suit on behalf of the United States. If the United States is successful in resolving or litigating those claims, the person who originally made the allegations may share in part of the recovery.

Following its investigation of Mr. Lee’s allegations, the United States filed its own civil complaint against Victory Memorial, a not-for-profit corporation that operated a full service acute care hospital in Bay Ridge, Brooklyn until May 2008. In that complaint, the United States alleged that Victory Memorial submitted Cost Reports for 1996 and 1997 that understated certain revenues for patient care, known as “charges.” This allegedly resulted in Victory Memorial having a higher Cost to Charge Ratio for those years, which in turn resulted in Victory Memorial obtaining higher reimbursements from Medicare for certain services. The United States further alleged that Mr. Lee informed officials at Victory Memorial of the inflated Cost to Charge Ratio in the hospital’s 1996 and 1997 Cost Reports, but the hospital failed to correct those submissions.

In settling the case, Victory Memorial, which filed a voluntary petition for relief in the United States Bankruptcy Court for the Eastern District of New York on November 15, 2006, has not admitted to engaging in the conduct at issue.

“Hospitals that attempt to defraud federal insurance programs will be held accountable to the full extent of the law,” stated United States Attorney Campbell. “The settlement reached in this case reflects our continuing commitment to vigorously investigate fraud on the Medicare Program.” Mr. Campbell thanked the Department of Health and Human Services, Office of Inspector General, for its assistance in the case.

The government’s case was handled by Assistant U.S. Attorney Paul Kaufman and former Assistant U.S. Attorney Denise McGinn, who were assisted by Affirmative Civil Enforcement Auditor Emily Rosenthal.

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