The United States Department of Justice (DOJ) recently announced an $18.6 million settlement with Columbus LTACH (d/b/a Silver Lake Hospital), to resolve allegations that the company claimed excessive cost outlier payments from the Medicare program. In addition to the $18.6 million False Claims Act settlement, some Silver Lake investors agreed to pay $12 million to resolve alleged Federal Debt Collection Procedures Act (FDCPA) violations for the fraudulent transfer of money by the hospital to its investors.
The False Claims Act settlement focused on cost outlier payments, which are payments made by Medicare to allow for supplemental reimbursements to hospitals in cases where the cost of care is unusually high. Cost outlier payments are calculated based on a formula set forth in the regulations, an adjustment to the hospital’s charges to the hospital’s costs by multiplying the hospital’s current charges by the hospital’s cost-to-charge ratios from previously submitted cost reports. The process also allows for a retrospective reconciliation process, as previously submitted cost reports may not reflect the hospital’s current cost-to-charge ratios. Under that process, the hospital may be required to pay back excessive outlier payments received.
According to the DOJ, from April 1, 2018, through March 31, 2023, Silver Lake improperly distorted the cost outlier payment system by quickly increasing its charges for inpatient care in excess of any increase in costs, such that when the costs were adjusted, the charges no longer reasonably reflected or approximated Silver Lake’s actual costs. Silver Lake also knowingly or recklessly concealed and improperly avoided its obligation to reimburse Medicare for excessive cost outlier payments, knowing it would not be able to pay back all of the payments when its cost reports were reconciled and the Medicare overpayments were properly identified.
The DOJ further alleged that from April 1, 2020, through March 31, 2023, Silver Lake made distributions of funds to certain investors for less than reasonably equivalent value when Silver Lake believed (or reasonably should have believed) it would incur debts to the United States through its actions, beyond Silver Lake’s ability to pay back the debts as they came due.
Silver Lake will pay $18,636,282 plus interest as the settlement amount – the entire amount of which is restitution. The settlement will be paid in 21 payments, with an initial payment followed by 20 quarterly payments starting on February 15, 2024, and ending on March 31, 2029.
The Silver Lake investors will jointly and severally be liable for paying $12 million plus interest – again the entire amount of which is restitution. These payments will also be made through an initial payment followed by 20 quarterly payments on the same time frame as the Silver Lake payments.
As we often see, the allegations resolved by the settlement have not been proven.
“Cost-outlier payments were intended to ensure that hospitals would provide care to all patients requiring their services,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “These payments were not intended to serve as a private source of enrichment for hospitals unrelated to the actual costs incurred in providing such care.”
“When a hospital submits false information to seek higher reimbursements, it can affect the availability of funds and services for others and drive up the cost of taxpayer-funded health care,” stated Special Agent in Charge Naomi Gruchacz of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “HHS-OIG will continue to work with our law enforcement partners to ensure that health care providers are held accountable if they attempt to exploit federal health care programs.”