WMC will pay $18M to settle feds’ fraud and kickback claims
Westchester Medical Center will pay $18.8 million to settle claims by the federal government that it engaged in a complex series of kickbacks involving a former cardiology practice on the hospital”™s Valhalla campus and filed false Medicare claims for services given at the private physician practice by the hospital”™s medical residents and fellows.
The settlement, announced today by U.S. Attorney Preet Bharara in Manhattan, involves the medical center”™s financial dealings from 2000 through 2007 with Cardiology Consultants of Westchester PC that violated the federal Anti-Kickback Statute and the Stark Law. The latter law prohibits the government from paying for health services ordered by physicians who have improper financial relationships with entities to whom they refer patients, according to the U.S. Attorney”™s Office for the Southern District of New York.
Agents at the U.S. Department of Health and Human Services and Federal Bureau of Investigation in Thursday”™s announcement said the medical center ”“ operated by Westchester County Health Care Corp., a public benefit corporation ”“ engaged in “aggressive, intricate kickbacks” and “a coordinated shakedown of Medicare and, by extension, taxpayers.”
The federal civil complaint alleges that WMC, through its practice management affiliate, Matrix Resources LLC, advanced about $450,000 to Cardiology Consultants between 2001 and 2002 to open and operate a medical office in Kingston with the aim of expanding WMC”™s referral base and service area into the Hudson Valley. As the specialty practice began repaying the advances, WMC entered into retroactive, no-work consulting contracts under which it paid CCW tens of thousands of dollars, according to the federal complaint.
At about the same time, the medical center broke with its past practice and began permitting Cardiology Consultants to use the hospital”™s medical residents and fellows in CCW”™s private office free of charge. As a result, the hospital”™s submission of reimbursement claims to the Medicare program for services provided to patients referred by cardiologists at CCW violated the False Claims Act, the federal complaint alleged.
WMC during the seven-year period also filed fraudulent Medicare cost reports and was reimbursed for time spent by its residents and fellows at other hospitals and non-hospital settings, although the medical center did not incur all or most of the costs of their salaries and fringe benefits, according to the complaint.
“The conduct of Westchester Medical Center is the reason the Anti-Kickback Statute and the Stark Law are so important,” Bharara said. “They are laws that help to rid the health care industry of conflicts that can improperly influence medical judgment, potentially jeopardizing patient care and causing federal health care programs to pay for excessive or unnecessary treatments.”
Westchester Medical Center issued this statement following Bharara’s announcement:
“Today”™s settlement resolves a long-standing government inquiry into matters that date back to the early 2000s, when Westchester Medical Center was under prior management. Although the medical center believes that its financial relationships with its clinical faculty are customary for academic medical centers of its size and complexity, we acknowledge that, with respect to a very small number of legacy relationships, we could not produce documentation sufficient to meet certain technical requirements of federal law. The medical center is proud of the quality of its clinical, research and teaching programs, the breadth and reach of its community service initiatives, and the exemplary compliance program it has developed to support these endeavors.”
The $18.8 million settlement agreement came one week after Moody”™s Investors Service announced it had downgraded the Westchester County Health Corp.”™s bond rating to Baa1 from A3.
The downgrade, which Moody”™s said affects approximately $447 million of bonds, was made because of WMC”™s affiliation agreement scheduled to take effect next Tuesday, which will make WMC the managing member of Bon Secours Charity Health System in the Hudson Valley with a 60 percent economic interest. Moody”™s said the affiliation will result in reduced liquidity and increased leverage for the hospital, “as well as depressed margins ahead of a turnaround.”
The lower bond rating reflects increased financial risk for WMC over the next several years as the Bon Secours system “implements a rapid expansion strategy to protect and grow market share in response to increasing competition,” according to Moody”™s analysts.
Those challenges, the investors service added, “are balanced by WMC”™s strong market position as a large provider of high acuity services, track record of relatively stable margins, proven ability to turn around operations at a recently acquired bankrupt hospital (the former St. Francis Hospital in Poughkeepsie), minimal debt structure risks and long-standing affiliation with Westchester County.”