U.S. Attorney for the District of New Jersey Philip Sellinger announced Jan. 16 that Silver Lake Hospital and certain investors agreed to pay $30.6 million to resolve allegations that the Newark-based long-term care hospital fraudulently overbilled Medicare.

Prosecutors alleged Silver Lake violated the False Claims Act by claiming excessive cost outlier payments from the Medicare program. Prosecutors then alleged that that money was transferred to investors, which violated the Federal Debt Collection Procedures Act (FDCPA) for the fraudulent transfer of money by the hospital to its investors.

Under the terms of the settlement, which will be paid over a five-year period, Silver Lake will pay $18.6 million, plus interest. The investors’ share of $12 million, plus interest, will come from Silver Lake’s principal investor Dr. Richard Lipsky and Columbus Management South LLC, an entity through which other Silver Lake investors received cash distributions from the hospital.

Silver Lake and its investors did not admit to liability under the agreement.

“This settlement resolves allegations that Silver Lake improperly distorted the cost outlier payment system by rapidly increasing its charges well in excess of any increase in its costs and far beyond what the hospital had the financial ability to repay once its Medicare cost reports were reconciled to account for these charge increases,” the U.S. Attorney’s Office for New Jersey said in a press release. “The settlement also resolves allegations that Silver Lake transferred millions of dollars in the hospital’s money to its investors without receiving equivalent value in return, at a time when the hospital had reason to believe that it would not be able to repay its debts to the Medicare program. The United States alleged that such conduct violated the FDCPA.”

“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,” said Sellinger. “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.”

“The Medicare outlier payment program is designed to provide hospitals with reimbursement for situations where extraordinary costly patient care is needed,” said FBI-Newark Special Agent in Charge James Dennehy. “Instead of using the outlier payment program as intended, Silver Lake was caught fraudulently obtaining enhanced reimbursements from Medicare they were not entitled to. Whatever magic trick or sleight of hand hospitals attempt to perpetrate fraud, the FBI and our law enforcement partners will diligently investigate and recovery any ill-gotten gains.”

An attorney representing the hospital and investors did not respond to a request for comment by publication of this story.

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