The Cathedral Healthcare System has agreed to pay $5.3 million, plus interest, to settle allegations that it defrauded the federal Medicare program, the Justice Department has announced.
"(The) settlement shows how the Department of Justice is committed to rooting out practices where hospitals knowingly overcharge the federal Medicare program," said Jeffrey S. Bucholtz, Acting Assistant Attorney General of the Justice Department's Civil Division.
The settlement resolves allegations that the Newark N.J.-based hospital system improperly increased charges to Medicare patients in order to obtain enhanced reimbursement from the federal healthcare program.
In addition to its standard payment system, Medicare pays supplemental reimbursement to hospitals, called outlier payments, in cases where the cost of care is unusually high. Congress enacted the supplemental outlier payment system to ensure that hospitals have the incentive to treat inpatients whose care requires unusually high costs.
According to the Justice Department, between January 1998 and August 2003, Cathedral improperly 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.
Cathedral is being charged in three separate federal lawsuits brought by whistleblowers under the federal False Claims Act. The False Claims Act permits private citizens to bring lawsuits on behalf of the United States.
As part of the settlement, Peter Salvatori and Sara Iveson, the whistleblowers in the first of the three lawsuits, will receive $848,000.
Cathedral has also entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services' Office of Inspector General. The agreement includes measures to ensure compliance with Medicare regulations and policies in the future.
"This settlement demonstrates this office's determination to ensure the integrity of the Medicare system for the citizens of New Jersey," said Christopher J. Christie, U.S. Attorney for the District of New Jersey