Five Defendants Pay Over $8 Million To Resolve Civil Fraud Allegations That They Billed Medicare And Medicaid For Unlicensed And Unnecessary Inpatient Detoxification Services

Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Scott J. Lampert, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General’s New York Region (HHS-OIG), today announced that three New York hospitals, Benedictine Hospital, Columbia Memorial Hospital, and St. Joseph’s Medical Center, together with SpecialCare Hospital Management Corporation (SpecialCare), a Missouri-based company, and SpecialCare’s chief executive officer, Robert McNutt, had agreed to pay over $8 million to resolve claims that they had defrauded the Medicare and Medicaid programs in connection with detoxification treatment provided to patients at the hospitals.

The settlements resolved claims brought jointly by the United States and the New York State Attorney General’s Medicaid Fraud Control Unit that the defendants operated inpatient drug and alcohol detoxification programs under the name "New Vision" without having received licenses from the New York State Office of Alcoholism and Substance Abuse Services.  Because the programs were unlicensed, the hospitals were not entitled to bill Medicare and Medicaid for treatment provided to patients.  The government also alleged that two of the hospitals, Columbia Memorial and St. Joseph’s, paid SpecialCare for patient referrals in violation of federal and state anti-kickback statutes. Additionally, the government claimed that services provided to New Vision patients were not medically necessary.  The period covered by the government’s allegations spanned 2002-2006.

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, and United States ex rel. Montaperto v. New Parkway Hospital, et al., Civil Action No. 05-CV-491.  United States District Judge Leonard D. Wexler presided over the two cases and approved each of the settlements announced today, including the settlement with St. Joseph’s Hospital which was entered on August 14, 2015.  Under the terms of their agreement with the government, SpecialCare and McNutt agreed to pay $6 million and to be enjoined from doing business with any Medicaid or Medicare provider in New York State for five-years. SpecialCare and McNutt also entered into a Corporate Integrity Agreement with the United States Office of Inspector General of the Department of Health and Human Services.  Pursuant to separate agreements, Benedictine Hospital paid $880,000; St. Joseph’s Medical Center paid $600,000, and Columbia Memorial Hospital paid $650,000.  These settlements bring the total recovery from the government’s investigation into SpecialCare and hospitals with New Vision programs to over $25 million.  Previously, New York Downtown Hospital and Our Lady of Mercy Medical paid $13.4 million and $4.5 million, respectively, to resolve the government’s civil fraud claims.

“Health care providers must understand that they cannot bill Medicare or Medicaid for unlicensed or otherwise unauthorized care.  These practices are not only fraudulent, but inflate the cost of health care in general," stated Acting United States Attorney Currie.  “Those who defraud and jeopardize the nation=s vital, federally-funded health care programs will be held fully accountable."  Mr. Currie thanked New York State Attorney General Eric Schneiderman and his staff, including Acting Director of the New York Medicaid Fraud Control Unit Amy Held and Principal Auditor Investigator Margaret McArdle, for their partnership in investigating the case. 

“Health care providers will be held accountable for the quality of care they deliver and the manner in which that care is provided,” said HHS-OIG Special Agent in Charge Lampert.  “This settlement is another example of HHS-OIG’s commitment to protecting the federally funded health care programs intended for our most vulnerable individuals.”

The United States’ investigation was handled by Assistant U.S. Attorney Richard K. Hayes, with assistance from Affirmative Civil Enforcement Auditor Emily Rosenthal.