A Medical Device Daily

Cooper University Hospital (Camden, New Jersey) has agreed to pay the federal government $3.85 million, plus interest, to resolve a whistleblower lawsuit alleging that it engaged in Medicare fraud by inflating its Medicare claims to boost its revenues.

According to the Department of Justice, the settlement resolves allegations that the hospital improperly increased charges to Medicare patients to obtain enhanced reimbursement from the federal healthcare program. In addition to its standard payment system, Medicare pays supplemental reimbursement, called outlier payments, to hospitals in cases where the cost of care is unusually high. Congress had enacted the supplemental payment system to provide the incentive to hospitals to treat such patients.

The DoJ alleged that, between January 2001 and August 2003, Cooper improperly inflated charges for inpatient and outpatient care to make its costs for providing such care appear greater than they actually were, and thereby obtain outlier payments from Medicare that it was not entitled to receive.

"Today's settlement demonstrates the commitment by the Justice Department to combat practices by which hospitals knowingly overcharge the federal Medicare program," said Assistant Attorney General Gregory Katsas, head of the DoJ's Civil Division.

The civil settlement agreement resolves allegations against Cooper originally brought in a 2005 whistleblower suit by Anthony Kite, an independent hospital consultant. Under the False Claims Act, private citizens may bring lawsuits on behalf of the federal government. Kite will receive $654,500 of the settlement.

"The government has been able to recover this money because of the information provided by a whistleblower," said Larry Zoglin, a San Francisco attorney with Phillips & Cohen, which represented the whistleblower. "Without our client's help, they probably wouldn't have found out about Cooper's alleged outlier fraud scheme."

Kite also was one of several whistleblowers who filed qui tam lawsuits exposing outlier fraud by other New Jersey hospitals. The hospitals that have settled those cases involving outlier payments were: Warren Hospital (Phillipsburg, New Jersey) for $7.5 million; Bayonne Medical Center (Bayonne, New Jersey) for $2.5 million; Cathedral Healthcare System (Newark, New Jersey) for $5.3 million; and Raritan Bay Medical Center (Perth Amboy, New Jersey) for $7.5 million.

The settlement with Cooper was the result of a coordinated effort among the DoJ's 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 FBI, in investigating and resolving the allegations.