Major New Jersey Hospital Pays $12.5 Million To Resolve Kickback Allegations

NEWARK, N.J. – The Cooper Health System has agreed with the U.S. Attorney’s Office for the District of New Jersey and the State of New Jersey to pay $12.6 million to settle allegations that it violated the federal False Claims Act and New Jersey False Claims Act by making improper payments to physicians under so-called “consulting” and “compensation” agreements as it sought to build its cardiology program.

U.S. Attorney Paul J. Fishman, Executive Assistant N.J. Attorney General John Hoffman, and Thomas O’Donnell, Special Agent in Charge of the U.S. Department of Health and Human Service's Office of Inspector General region that includes New Jersey, announced the settlement, which was unsealed today.

“Payments to outside physicians by hospitals require heightened scrutiny because those payments may be improper if they are based on patient referrals,” said U.S. Attorney Fishman. “Such kickback arrangements interfere with the physician-patient relationship and can lead to problems of overutilization and increased costs. Federal health care participants, such as Cooper, who run afoul of the prohibitions against kickbacks must be held responsible.”

“Cooper has taken responsibility for its past misconduct,” said Executive Assistant Attorney General Hoffman. Attorney General Jeffrey S. Chiesa is recused from the Cooper matter. “We commend Cooper for implementing substantial internal reforms and accountability measures designed to address the government's concerns and avoid any future transgressions."

“People in Medicare and Medicaid should be confident that health providers are not being inappropriately influenced by financial gain," said Special Agent in Charge O’Donnell. “We will aggressively pursue all those who abuse Federal programs for personal gain.”

According to the results of the joint investigation:

The United States and New Jersey contend that from Oct. 1, 2004, through December 31, 2010, Cooper recruited local outside physicians to serve on the Cooper Heart Institute Advisory Board (“CHIAB”). Physicians were paid approximately $18,000 a year to attend four meetings over the course of any given year. The United States and New Jersey allege that at least one purpose of these payments was to induce the referral of patients to Cooper, that the payments did, in fact, induce such referrals to Cooper, and that Cooper’s subsequent billing of the Medicare and Medicaid programs for services resulting from those tainted referrals were in violation of federal and state anti-kickback and self-referral laws and thus, false claims.

The civil settlement agreement is between (1) the United States of America – acting through the United States Attorney’s Office for the District of New Jersey and on behalf of the Office of Inspector General of the United States Department of Health and Human Services (HHS OIG); (2) the State of New Jersey; and (3) the Cooper Health System. In resolution of the federal and state civil claims, Cooper has agreed to pay $10,200,000 to the United States and $2,300,000 to the State of New Jersey. Cooper has further enacted and agreed to maintain a number of corporate reforms designed to enhance accountability, training, and other aspects of its compliance operations.

The settlement resolves a False Claims Act suit by a physician who was recruited to take part in the CHIAB, but, instead, recognizing its potentially unlawful purpose, demurred and filed a whistleblower – “qui tam” – action. The qui tam provisions of both the federal and state False Claims Acts permit private individuals, known as relators, to file such actions and share in a portion of the proceeds recovered.

U.S. Attorney Fishman credited special agents of HHS OIG, under the direction of Special Agent in Charge O’Donnell, for the investigation leading to today’s settlement. Acting New Jersey Attorney General Hoffman also credited Deputy Attorney’s General Michelle Weiner and Lisa Kutlin for their handling of this matter.

The government is represented by Assistant U.S. Attorney David E. Dauenheimer of the U.S. Attorney’s Office Health Care and Government Fraud Unit in Newark, and Deputy Attorney General Samuel Cornish of the N.J. Attorney General’s Office

The claims settled by this agreement are allegations only; there have been no admissions of liability.

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Defense counsel: John M. Vazquez Esq., Michael Critchley Sr. Esq., both Roseland, N.J

Cooper Health Settlement Agreement
Cooper, Signed Order