Cayuga Medical Center to pay more than $3 million in false claims settlement

Cayuga Medical Center

Cayuga Medical Center in Ithaca will pay more than $3 million to settle claims that it submitted false claims to Medicare and Medicaid.

That's the word from federal prosecutors who say they have settled a matter involving allegations that the medical center submitted the false claims in connection with improper physician recruitment agreements entered into between Cayuga Medical Center and various medical practices.

Under the terms of the agreement, Cayuga Medical Center agreed to pay a total sum of $3,576,056. Of that amount, the State of New York will receive more than $426,000 and federal health care programs will recover about $3.1 million.

The settlement resolves a lawsuit filed by Dr. Daniel Jorgenson, a plastic surgeon, who used to work in Ithaca. Dr. Jorgenson alleged that Cayuga Medical Center recruited physicians into the local area pursuant to recruitment agreements which violated federal law. He said the Medical Center submitted claims for payment to Medicare and Medicaid, while certifying that it was in compliance with federal law, when in fact it was not.

Dr. Jorgenson alleged that Cayuga Medical Center paid for expenses that were not permitted by said regulations and guidelines and improperly extended a recruitment agreement and therefore submitted false claims to Medicare and Medicaid when it certified in connection with billing that it was complying with federal laws and regulations.

Prosecutors say Cayuga Medical Center cooperated with the investigation, which found no evidence of any criminal violations. They also say patient care or safety was not compromised in any way.

"In bringing this matter to the attention of federal and state officials, Dr. Jorgenson assumed professional and litigative risks," said U.S. Attorney Richard Hartunian. "His filing of the qui tam law suit resulted in corrective action by Cayuga Medical Center, as well as the settlement payment of over $3.5 million. These are important results for the American taxpayers and bring more confidence to the integrity of our federal health care system."

Pursuant to the law, for his role in reporting his concerns and his cooperation throughout the investigation, Dr. Jorgenson will receive 18 percent of the settlement proceeds, or nearly $567,000.

Dr. Rob Mackenzie, President and CEO of Cayuga Medical Center, said in a statement:

"The regulation oversight was discovered by our corporate compliance program in 2007 and was immediately reported to the Office of Inspector General. The government settlement that we have agreed to does not involve any findings of fraud or abuse. To avoid a lengthy legal proceeding, high legal costs, and the potential of a much larger payback that might result from a trial, and to do what is in the best interest of Cayuga Medical Center and the community, we have decided to settle this matter involving a payback of $3.5 million to the federal government. Cayuga Medical Center always strives to do the right thing in a very complex regulatory environment that is always changing. We take our responsibility of being stewards of taxpayer funded programs very seriously and believe our internal controls are comprehensive."

A document provided to the media by the Vice President for Public Relations at Cayuga Medical Center states that a change was made to a regulation, "indicating that loans to physicians joining an existing practice could no longer include any portion of that practice's overhead, unless new space or staff was added. All contracts entered into after this change were and continue to be compliant. However, the government did not "grandfather" prior recruitment contracts."

It goes on to say that in 2007, they "discovered that four recruitment contracts signed prior to 2004 had not been corrected, due to our administrative oversight. This oversight was discovered through our internal compliance program, which helps make sure we are always doing the right thing at CMC. Once we discovered our oversight, we immediately self-reported it to the Office of Inspector General (OIG)."

Read more of the response from Cayuga Medical Center.