News and Press Releases

The United States and Ny Downtown Hospital Settle Civil Fraud Claims for $13.4 Million

September 5, 2012

Settlement Resolves Claims That Hospital Defrauded Federally-Funded Health Insurance Programs Including Medicare and Medicaid

Loretta E. Lynch, United States Attorney for the Eastern District of New York, today announced the settlement of claims that New York Downtown Hospital (“NY Downtown”) defrauded the Medicare and Medicaid Programs in connection with an inpatient detoxification program which the hospital operated during the period July 21, 1998 through February 14, 2006. Pursuant to the settlement, NY Downtown has agreed to pay the United States and the State of New York $13.4 million.

The government’s claims arose from an investigation of allegations made in suits filed by private individuals pursuant to the False Claims Act, 31 U.S.C. §§ 3729-33, United States ex rel. Mathew I. Gelfand, M.D. v. SpecialCare Hospital Management Corp., et al., Civil Action No. 02-CV-6079; United States ex rel. Montaperto v. New Parkway Hospital, et al., Civil Action No. 05-CV-4911. The government’s claims against NY Downtown, have been resolved pursuant to an agreement approved by United States District Judge Leonard D. Wexler. Previously, the government resolved claims against Our Lady of Mercy Medical for $4.5 million. Claims against other defendants in the actions are pending.

The United States’ investigation established that NY Downtown, together with a Missouri-based company, Special Care Hospital Management Corporation (“Special Care”), operated an inpatient drug and alcohol detoxification program under the name New Vision without having received a license from the New York State Office of Alcoholism and Substance Abuse Services. Because the program was unlicensed, NY Downtown was not entitled to bill Medicare and Medicaid for treatment provided by the program. Additionally, the government’s investigation established that NY Downtown paid Special Care for patient referrals in violation of federal and state anti-kickback statutes. NY Downtown has denied the government’s allegations.

Medicare is a federally-funded health insurance benefits program which comprises several parts, including hospital insurance benefits for eligible persons aged 65 and older and for eligible persons with disabilities. Medicaid is a joint federal-state program which provides health care benefits for certain groups, primarily the poor and disabled. Under the settlement agreement, NY Downtown will be paying the United States $5,840,000.00, with interest, and will be paying New York State $7,560,000.00, with interest.

“We all pay when hospitals and their partners obtain Medicare and Medicaid funds to which they are not entitled. Health care providers must understand that they are not allowed to bill Medicare or Medicaid for unlicensed or otherwise unauthorized care. These practices are not only fraudulent, but serve to inflate the cost of health care in general,” stated Ms. Lynch. “The settlement demonstrates the commitment of this Office to hold those who defraud and jeopardize the nation’s vital, federally-funded health care programs fully accountable.”

Ms. Lynch thanked the Office of the New York State Attorney General, with whom the case was jointly investigated and prosecuted, and thanked the Office of the Inspector General for the Department of Health and Human Services for its assistance in investigating the case.

The United States’ case was handled by Assistant United States Attorney Richard K. Hayes with the assistance Emily J. Rosenthal, Affirmative Civil Enforcement Auditor.