Whistleblower case against New Jersey hospital for Medicare fraud settles for $1.75 million

"Qui tam" lawsuit alleged hospital wrongly sought "outlier" payments

NEWARK, NEW JERSEY, Oct. 21, 2008 -- St. Joseph Healthcare System Inc. has agreed to pay $1.75 million to the federal government to settle a whistleblower lawsuit that alleged the Paterson, New Jersey, hospital engaged in Medicare fraud by improperly inflating its Medicare reimbursement claims.

The settlement, filed in federal district court today, follows a string of multi-million-dollar settlements resulting from "qui tam" lawsuits against New Jersey hospitals for allegedly inflating their reimbursement claims to Medicare to receive supplemental, or "outlier," payments.

The Medicare program makes outlier payments to hospitals when the actual costs for treating a particular patient greatly exceed a predetermined reimbursement amount for that type of treatment.

"The number of hospitals that have settled these cases in New Jersey makes clear that fraudulent outlier payments have been a drain on the Medicare program," said Larry P. Zoglin, a San Francisco attorney with Phillips & Cohen LLP, which is representing the whistleblower in the qui tam case. "Whistleblowers have played a huge role in stopping the fraud."

The qui tam lawsuit against St. Joseph's hospital was filed in 2005 in federal district court in Newark, New Jersey, by Anthony Kite, an independent hospital consultant in New Jersey.

Although most qui tam lawsuits are successful only if the government joins the case, the whistleblower and Phillips & Cohen pursued the case against St. Joseph's on their own.

The whistleblower's lawsuit alleged that St. Joseph's submitted reimbursement claims to Medicare that exceeded its actual treatment costs so that it would receive outlier payments.

Cooper University Hospital in Camden, New Jersey, paid $3.85 million last month to settle a similar qui tam lawsuit brought by Kite. The hospital consultant also was one of several whistleblowers who filed qui tam lawsuits alleging outlier fraud by other New Jersey hospitals. The hospitals that have settled those cases involving outlier payments were: Warren Hospital in Phillipsburg, New Jersey (paying $7.5 million); Bayonne Medical Center in Bayonne, New Jersey ($2.5 million); Cathedral Healthcare System, based in Newark, New Jersey ($5.3 million); and Raritan Bay Medical Center in Perth Amboy, New Jersey ($7.5 million).

Phillips & Cohen is the largest and most successful law firm that specializes exclusively in representing whistleblowers in qui tam lawsuits and tax fraud matters. Under the False Claims Act, whistleblowers are entitled to receive a reward of 15 percent to 25 percent of the amount recovered by the government as a result of their qui tam lawsuits. For more information about Phillips & Cohen's record, see P&C's Successful Whistleblower Cases.