Over $18.6 Million Settlement Reached by Silver Lake Hospital for Alleged False Claims Act Violations
Columbus LTACH, operating under the name Silver Lake Hospital, a Newark, New Jersey-based long-term care hospital, has agreed to pay over $18.6 million, along with interest, to settle allegations of False Claims Act violations related to excessive cost outlier payments from the Medicare program.
Additionally, certain investors linked to Silver Lake have agreed to pay $12 million, plus interest, to resolve allegations of Federal Debt Collection Procedures Act (FDCPA) violations concerning the hospital’s fraudulent money transfer to its investors. The negotiated settlement amounts will be disbursed over a five-year period, considering Silver Lake’s financial constraints.
In addition to its standard payment system, Medicare offers hospitals supplementary reimbursement known as “cost outlier” payments when the cost of care is exceptionally high. The purpose is to ensure hospitals have the incentive to treat inpatients with unusually expensive care needs.
Cost outlier payments are calculated using a formula outlined in regulations, adjusting a hospital’s charges to its costs by multiplying current charges by cost-to-charge ratios from previously submitted cost reports. As these reports may not accurately reflect the hospital’s current ratios, Medicare allows for a retrospective reconciliation process.
This settlement addresses allegations that Silver Lake manipulated the cost outlier payment system by significantly inflating its charges, surpassing any corresponding increase in costs and exceeding the hospital’s financial capacity to repay once Medicare cost reports were reconciled.
The settlement further addresses accusations that millions of dollars from the hospital’s funds were transferred to investors without corresponding value in return when Silver Lake had reason to believe it couldn’t repay its Medicare debts. This alleged conduct is said to have violated the FDCPA.
As per the settlement agreement with the United States, the payments to resolve FDCPA allegations will be made by Dr. Richard Lipsky, Silver Lake’s principal investor, and Columbus Management South LLC, an entity through which other Silver Lake investors received cash distributions from the hospital.
Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division, stated, “Cost-outlier payments were intended to ensure that hospitals would provide care to all patients requiring their services. These payments were not intended to serve as a private source of enrichment for hospitals unrelated to the actual costs incurred in providing such care.”
U.S. Attorney Philip R. Sellinger for the District of New Jersey added, “Medicare serves to ensure that patients get necessary care, including when that care is very expensive.
Medicare is not there for hospitals and their investors to gain unwarranted financial windfalls. As alleged, this hospital falsely reported its costs to Medicare for years and reaped millions in unjustified payments. Along with our partners, this office is committed to protecting the Medicare system from all forms of fraud schemes.”
Assistant Director Michael Nordwall of the FBI’s Criminal Investigative Division remarked, “This settlement underscores the FBI’s commitment to investigating fraudulent activity in the health care industry. The FBI and our law enforcement partners will continue to investigate hospitals who deceptively bill federal health care programs and prioritize investor enrichment at the expense of taxpayers.”
Special Agent in Charge Naomi Gruchacz of the Department of Health and Human Services Office of Inspector General (HHS-OIG) stated, “When a hospital submits false information to seek higher reimbursements, it can affect the availability of funds and services for others and drive up the cost of taxpayer-funded health care. HHS-OIG will continue to work with our law enforcement partners to ensure that health care providers are held accountable if they attempt to exploit federal health care programs.”