NY hospital agrees to $45 million Medicaid settlement

On Sept. 22, Staten Island (NY) University Hospital agreed to pay $45 million to settle allegations that it overbilled Medicaid for outpatient services for nearly five years, according to New York State Attorney General Eliot Spitzer. That settlement marks the largest recovery by one state in the history of the Medicaid program.

The 635-bed hospital will also have an outside monitor for five years. Assistant Deputy Attorney General Thomas Staffa says no other state Medicaid Fraud Unit has ever imposed such a measure. He says his office is still reviewing who that monitor will be.

In addition to a $4.5 million cash down payment, $40.5 million will be withheld from the hospital over 20 years by the Medicaid program. On top of that, the hospital will also be required to provide $39 million in uncompensated services to indigent patients over the next 20 years.

"The settlement is final only with respect to the hospital as a corporation," Staffa reports. "This settles the hospital’s criminal and civil liability but there is an ongoing investigation into individuals who may have intentionally misbilled."

"What Staten Island did was take advantage of outpatient clinic billings," he explains. "They basically were billing an enhanced rate for [ambulatory care] patients." The New York Department of Health has since sent out a letter reminding the hospitals that they cannot bill unless they meet the regulations that call for specific outpatient facility criteria.

According to Staffa, an anonymous tip triggered a widespread investigation of the hospital's outpatient billing practices across 500 part-time clinics. Investigators say those "clinics" were merely rooms in residences used by hospital subcontractors.

The investigation determined that the hospital received $1.6 million for improper claims for outpatient services between January 1994 and August 1998. The services, which included occupational, physical, and speech therapies and psychotherapy, were billed as hospital outpatient services that are reimbursed at a rate 10 times higher than the charge individual therapists could have billed.