Brookhaven Memorial settles Medicare fraud charges

Brookhaven Memorial Hospital Medical Center has agreed to pay $2.92 million to the federal government to settle charges that the East Patchogue hospital defrauded Medicare.

The agreement caps a five-year legal battle that began when a whistle-blower sued the hospital. He alleged that Brookhaven intentionally inflated charges to patients to reap higher Medicare reimbursements.

The alleged fraud involved tens of millions of dollars. In one year, the hospital's inpatient costs were more than $40 million, but its charges to Medicare were more than $245 million, the government alleged.

The agreement is between the hospital and the Justice Department, which joined the 2005 lawsuit by whistle-blower Anthony Kite, a New Jersey consultant who learned of Brookhaven's alleged practices from a consultant who worked there.

As part of the settlement, Brookhaven admitted no wrongdoing and said it settled to save time and money.

"Brookhaven's decision to enter this settlement does not change our position that all our actions were fully compliant with federal and state laws and regulations," said Christopher Banks, the hospital's vice president for external relations.

According to the government, the hospital intentionally inflated its costs so it could take advantage of supplemental reimbursements called "outlier payments." They are made by Medicare to compensate hospitals for treating patients whose care is very expensive.

But the government charged the hospital was reimbursed at higher rates for cases that were not extraordinarily costly.

"Medicare has long been a deep pocket for the hospitals and health care companies to seek profits and revenues, even when they are not entitled to them," said Kite's attorney, Tom Loeser of Hagens Berman Sobol Shapiro in Seattle.

Loeser said Kite had brought the lawsuit against 18 hospitals, most of them in New Jersey.

Banks said Brookhaven raised its rates not to defraud the government but to bring them in line with its costs.

The government made these specific allegations:

In November 2001, Robert Shusko of Healthcare Reimbursement Solutions Inc., a New Jersey consulting firm, wrote to Brookhaven chief financial officer Ronald Girualo, saying Shusko's firm could increase reimbursements at the hospital. The hospital would pay the consultant 25 percent of the increase in outlier payments.

Between January and March 2002, the hospital raised charges 150 percent, and another 20 percent that October.

While the hospital's Medicare costs rose from $32.4 million to $37.3 million from 2001 to 2002, its inpatient Medicare charges rose from $78.8 million to $209.4 million.

By 2003, its Medicare inpatient costs had risen to $43.5 million while its charges had increased to $245.2 million.