Westchester Medical Center settles $7M Medicaid fraud suit

Westchester Medical Center in Valhalla. (Aug. 8, 2012)

Westchester Medical Center in Valhalla. (Aug. 8, 2012) (Credit: Leslie Barbaro)

Admitting its employees submitted false Medicaid claims for nearly a decade, Westchester Medical Center will pay $7 million in damages after settling with federal prosecutors Wednesday.

The cash-strapped Valhalla hospital submitted false reimbursement claims for outpatient mental health services to Medicaid from August 2001 through June 2010, U.S. Attorney Preet Bharara's office said. The investigation began with tips from a whistle-blower -- described by an attorney as a "former high-ranking medical center employee" -- who will receive $700,000 for his efforts.

The hospital submitted reimbursement claims without the necessary documentation, didn't return money when it overbilled the government and "avoided dealing with compliance issues and instead focused on maximizing billing," the lawsuit contended.

And "until at least June 2010, Westchester Medical Center failed to take any but the most insignificant steps to address the problem, or to conduct any systematic audit of the clinics' records," Bharara's office said in a statement.

It's not clear whether prosecutors believed hospital management was intentionally defrauding Medicaid initially, but the lawsuit blames managers for actively working to prevent corrective action.

Prosecutors said the hospital's management "knew for years" employees in the Behavioral Health Center were submitting false or incomplete claims and that the hospital "was paid millions of dollars ... to which it was not entitled."

Westchester Medical Center has faced serious financial troubles in recent years, leading to drastic changes and putting hospital management at odds with its employees.

Although it was a county-owned hospital for the better part of 80 years, in 1998 the hospital went private, albeit as a public benefit corporation. That means it's not government-owned or government-run but operates under a government charter to provide services to the public.

Despite recent cuts, Westchester Medical Center is the largest mental health facility in the county. Hospital union leaders staged a news conference earlier in October to protest a new round of layoffs after management said the hospital would shed 200 jobs. Earlier in 2012, the hospital slashed 250 nurse aid positions and outsourced the work to a private company. In January, the hospital reduced the number of nurses it employs by more than 100.

Hospital management has said the layoffs were necessary to overcome a $60 million budget shortfall. The hospital's operating budget for 2012 was $871 million.

It's not clear whether the hospital's financial woes were a factor in management's decision to ignore the problem.

"Today's settlement involves not the quality, medical necessity or substance of the services provided by the Behavioral Health Center, but only technical deficiencies in the clinical documentation that the New York Medicaid program requires to bill outpatient clinic claims," David Billig, the hospital's spokesman, said in a statement.

Behavioral Health Center employees "exhaustively audited and improved the documentation practices of its clinicians more than two years ago, when these issues first came to light, followed by a voluntary self-disclosure to the state."

Billig did not say how the hospital would pay the $7 million in damages or whether the hospital would be forced to make additional cuts to pay the damages. It was not clear how hospital officials reconciled their statement that the issue was self-disclosed with the fact that the case was prompted by information from a whistle-blower.

Federal prosecutors don't intend to bring criminal charges against hospital leadership, said Herb Haddad, a spokesman for Bharara.

Under the terms of the settlement, Westchester Medical Center will pay $3.5 million each to the federal government and New York State.

The whistle-blower will receive $700,000 for providing details of the ongoing fraud to prosecutors, according to Timothy J. McInnis, a Manhattan-based attorney who represented the whistle-blower, identified only as "relator" in legal documents.

The whistle-blower worked at the hospital for about 10 months and reported his concerns after he left Westchester Medical Center, according to McInnis, a former federal prosecutor. The lawsuit was sealed for months after the whistle-blower's departure, McInnis said, offering a measure of protection as he distanced himself from the hospital.

"It's an extremely difficult step for anyone to take," McInnis said. "It was a particularly difficult step for this person because he was a high-level executive, and that makes the consequences in terms of his career more pressing."

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