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Post date: September 22 1999

Spitzer Announces Record $45 Million Settlement With Staten Island University Hospital

State Attorney General Spitzer today announced a record settlement totaling $45 million with Staten Island University Hospital for over billings to the state Medicaid program.

The amount of money recovered is believed to be the largest by one state in the history of the Medicaid program. The civil settlement also includes a first for a New York Medicaid case -- the appointment of an outside monitor to ensure proper billing practices.

"In crafting this settlement we had three objectives," said Spitzer. "We were committed to recovering this money for our taxpayers; we wanted to ensure that we did not bankrupt the hospital and in doing so, harm the people of Staten Island; and, we felt that protections had to be in place so that the hospital would not revert to wrongful billing practices. I believe this is a creative, precedent-setting agreement which achieves each of our goals."

The over billings took place between January of 1994 through August of 1998 for outpatient services and were uncovered by the Attorney General's Medicaid Fraud Control Unit. The case was triggered by an anonymous tip that resulted in a comprehensive investigation of SIUH's Medicaid outpatient clinic billing practices.

As a result of the SIUH case, the Attorney General's office analyzed similar billings by other hospitals across the state and found widespread problems with outpatient billings. That investigation resulted in a directive by the State Health Department, re-emphasizing the rules governing specific outpatient billings. The effect of the directive reduced Medicaid billings by as much as $10 million per month from August of 1998 through August of this year, saving state taxpayers over $100 million.

Spitzer's investigators found that SIUH had submitted and been paid for some 1.6 million improper claims for outpatient services for developmentally disabled residents living in adult homes or group residences in New York, Long Island, Rockland and Orange counties.

The over billings by the hospital took place at more than 500 part-time "clinics," which were, in reality, merely rooms in the residences which were used by hospital subcontractors as part of the Hospital's outreach program.

The services, which included occupational, physical, speech therapy and psychotherapy were billed to Medicaid as hospital outpatient services which are reimbursed at a rate ten times higher than the charge individual therapists could have billed.

In addition to the billing problems, investigators found that the services

  • were unsupported by evidence of genuine medical necessity;
  • Consisted more often of recreational activities than therapy;
  • Were characterized by inadequate hospital supervision;
  • Included social work services which are not billable to Medicaid as hospital outpatient services.

The settlement totals $84 million and breaks down as follows-

  • A $4.5 million cash down payment;
  • $40.5 million over 20 years which will be withheld from SIUH by the Medicaid program;
  • The hospital will provide $39 million in uncompensated and/or free services to indigent patients over the next 20 years.

In addition, the hospital agrees to the appointment of an outside monitor acceptable to the Attorney General's office for five years to ensure that the hospital does not repeat any wrongful billing practices.

"This is a very significant case for two reasons," said Spitzer. "We have recovered tens of millions of dollars for our taxpayers, and our investigation has changed the billing practices of other hospitals across New York, resulting in a significant decrease in Medicaid costs to the state."

The Counsel for the National Association of Medicaid Fraud Control Units, Barbara Zellner said: "The settlement between the Attorney General's Office and Staten Island University Hospital is, I believe, the largest monetary settlement between a health care provider and a state. While many health care settlements require the establishment of a compliance program, this is the first time that a state Medicaid Fraud Control Unit is imposing an outside monitor to review the future conduct of a hospital."

The civil settlement covers only the hospital's corporate liability and requires SIUH to cooperate with an on-going investigation by the Attorney General's office into individuals who work for the hospital, as well as its subcontractors for possible criminal wrongdoing.

The settlement was supervised by the head of Spitzer's Medicaid Fraud Control Unit, Jose Maldonado, who said: "We want our investigation and this settlement to send a very clear message to those providing care for the indigent across the state: Play by the rules and live up to your responsibilities because we are committed to vigorously enforcing the Medicaid program's regulations and protecting state taxpayers."

The investigation was conducted by Special Assistant Attorney General Patrick Lupinetti, Director of the MFCU Special Projects Unit. Assistant Deputy Attorney General Thomas Staffa led the negotiations for the Attorney General's office.

Spitzer thanked the New York State Department of Health for its assistance during the course of the investigation.

SIUH is a 653 bed facility located at 475 Seaview Avenue on Staten Island.