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Special Care & NY Hospitals Settle Lawsuit For $8 Million

SpecialCare Hospital Management Corp. and three New York hospitals agreed this week to pay a total of more than $8 million to New York and the federal government to settle a whistleblower lawsuit and government charges alleging they defrauded the Medicaid and Medicare programs.

The case alleged that the three hospitals – Columbia Memorial Hospital in Hudson, St. Joseph’s Medical Center in Yonkers and Benedictine Hospital in Kingston – each paid Specialcare Hospital Management Corp. monthly fees disguised as administrative services in exchange for referring patients to their unlicensed inpatient detoxification units for drug and alcohol treatment. In addition, the inpatient detoxification services allegedly were neither medically necessary nor did they meet professionally recognized standards of care.

“Drug and alcohol treatment programs are designed to help vulnerable people struggling with addiction,” Attorney General Eric T. Schneiderman said in a press release. “By exploiting their need and the Medicaid program in order to maximize revenue, SpecialCare Hospital Management Corporation, St Joseph’s Medical Center, Benedictine Hospital and Columbia Memorial Hospital wasted Medicaid resources and illegally billed taxpayers for unlicensed and medically unnecessary treatment services.”

SpecialCare and the for-profit vendor’s Chief Executive Officer Robert McNutt agreed to pay a total of $6 million and submit to a five-year injunction on doing business with any Medicaid or Medicare providers in New York. Each of the hospitals agreed to separate settlements totaling more than $2 million to resolve allegations that they submitted false claims for inpatient detoxification services.

Two whistleblowers sparked the investigation after filing a “qui tam” (False Claims Act) complaint. In previous settlements of this case, New York Downtown Hospital in New York, New York paid $13.4 million in 2012 and Our Lady of Mercy Medical Center in Bronx, New York paid $4.5 million in 2008 for allegedly making false claims to Medicaid and Medicare.

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