CHILDREN'S HOSPITAL SETTLES FALSE CLAIMS ACT ALLEGATIONS; WILL PAY $12.9 MILLION

FROM:  U.S. JUSTICE DEPARTMENT
Monday, June 15, 2015

Children's Hospital to Pay $12.9 Million to Settle False Claims Act Allegations
Children’s Hospital, Children’s National Medical Center Inc. and its affiliated entities (collectively CNMC) have agreed to pay $12.9 million to resolve allegations that they violated the False Claims Act by submitting false cost reports and other applications to the components and contractors of the Department of Health and Human Services (HHS), as well as to Virginia and District of Columbia Medicaid programs, the Department of Justice announced today.  CNMC is based in Washington, D.C., and provides pediatric care throughout the metropolitan region.

“The false reporting alleged in today’s settlement deprived the Medicare Trust Fund of millions of taxpayers’ dollars,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “Such conduct wastes critical federal health care program funds and drives up the costs of health care for all of us.”

“The integrity of federal health care programs depends on honest and accurate reporting from the hospitals and other health care providers that receive hundreds of billions of tax dollars every year,” said Acting U.S. Attorney Vincent H. Cohen Jr. of the District of Columbia.  “This settlement demonstrates our commitment to defending the integrity of the system and ensuring that taxpayer money goes to meet the most critical health care needs.  We will continue to work with whistleblowers like the former employee who came forward in this case to battle waste, fraud and abuse that fuel the skyrocketing cost of health care.”

According to the settlement agreement, CNMC misstated information on cost reports and applications in two distinct manners to HHS.  This false information was used by HHS and Medicaid programs to calculate reimbursement rates to CNMC.  The United States contended that CNMC misreported its available bed count on its application to HHS’ Health Resources and Services Administration under the Children’s Hospitals Graduate Medical Education (CHGME) Payment Program.  The CHGME Payment Program provides federal funds to freestanding children’s hospitals to help them maintain their graduate medical education programs that train pediatric and other residents.  The United States further contended that CNMC filed cost reports misstating their overhead costs, resulting in overpayment from Medicare and the Virginia and District of Columbia Medicaid programs.

The settlement resolves allegations brought in a lawsuit filed under the qui tam or whistleblower provisions of the False Claims Act by James A. Roark Sr., a former employee of CNMC.  Under the act, a private citizen can sue on behalf of the United States and share in any recovery.  The United States is entitled to intervene in the lawsuit, as it did here.  As part of the resolution, Mr. Roark will receive $1,890,649.98.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $24.3 billion through False Claims Act cases, with more than $15.3 billion of that amount recovered in cases involving fraud against federal health care programs.

This matter was handled by the U.S. Attorney’s Office of the District of Columbia with assistance from the Civil Division’s Commercial Litigation Branch and the HHS’ Office of Inspector General.