A Medical Device Daily
The United States has agreed to settle for $2.5 million, plus interest, allegations that Bayonne Medical Center (Bayonne, New Jersey) defrauded the Medicare program, the Justice Department reported. The settlement is with IJKG (also Bayonne) the buyer of the hospital. Bayonne Medical Center is currently in bankruptcy.
The settlement resolves allegations that the hospital improperly increased charges to Medicare patients in order to obtain enhanced reimbursement from Medicare. In addition to its standard payment system, Medicare provides supplemental reimbursement, called outlier payments, to hospitals and other healthcare providers in cases where the cost of care is unusually high. Congress enacted the supplemental outlier payment system to ensure that hospitals possess the incentive to treat inpatients whose care requires unusually high costs.
The Justice Department alleged that, between January 2000 and August 2003, Bayonne purposefully inflated charges for inpatient and outpatient care to make these cases appear more costly than they actually were, and thereby obtained outlier payments from Medicare that it was not entitled to receive.
In 2007, Bayonne Medical Center filed for bankruptcy under Chapter 11 of the Bankruptcy Code. As part of the proposed reorganization, IJKG agreed to purchase the hospital’s assets and to settle the United States’ claims against the hospital.
The civil settlement agreement released yesterday resolves allegations against Bayonne that were filed in a lawsuit brought by a whistleblower under the federal False Claims Act. The False Claims Act permits private citizens, known as realtors, to bring lawsuits on behalf of the United States. Under the settlement, James Monahan, the realtor in the lawsuit, will receive $400,000.
In other legalities: The law firm of Schiffrin Barroway Topaz & Kessler reported a class action lawsuit that was filed in the United States District Court for the District of Massachusetts on behalf of all purchasers of securities of American Dental Partners (ADP; Wakefield, Massachusetts) between August 10, 2005 through December 13, 2007.
The complaint charges ADP and certain of its officers and directors with violations of the Securities Exchange Act of 1934. ADP is a business partner and provider of services to dental group practices.
More specifically, the complaint alleges that the company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: that the company engaged in tortious and unlawful conduct towards Park Dental Group (PDG; Denver); that as a result of this conduct, the company booked a large portion of earnings and revenue which materially inflated financial figures; that the company’s financial statements were not prepared in accordance with Generally Accepted Accounting Principles; that the company lacked adequate internal and financial controls; and that, as a result of the foregoing, the company’s financial statements were materially false and misleading at all relevant times.
Beginning on January 1, 1999, ADP subsidiary PDHC (PDHC; Wakefield) entered into a service agreement with PDG. The service agreement was amended January 1, 2001 and again on August 10, 2005. According to the company’s financial statements, the relationship with PDG accounted for about 30% of the company’s consolidated net revenue between 2004 and 2006. No other customer of ADPI accounted for more than 10% of the company’s consolidated net revenue.
On Dec. 12, 2007, investors learned that a judgment had been awarded in favor of PDG, against PDHC and ADP. The jury in the case awarded PDG $88,290,647 in damages.
Upon the release of this news, the company’s shares declined $5.36 per share, or 27.21%, to close on Dec. 12, 2007 at $14.34 per share, on unusually heavy trading volume.