NEW YORK (Legal Newsline) - New York Attorney General Eric Schneiderman announced a $13.4 million settlement on Wednesday with New York Downtown Hospital to resolve allegations of Medicaid fraud.

New York Downtown Hospital allegedly received illegal payments on claims for alcohol treatment and unlicensed inpatient drug treatment as well as care rendered to patients who were referred unlawfully. The hospital also allegedly conspired with a for-profit out-of-state vendor of purported administrative services to send false claims to Medicaid.

Under the terms of the settlement, the hospital will return more than $12.6 million to the Medicaid program and $800,000 to the federal Medicare program.

New York Downtown Hospital allegedly entered into an illegal patient referral scheme with SpecialCare Hospital Management Corp., an out-of-state vendor, that was disguised as an agreement for administrative services. Schneiderman alleged that the hospital paid SpecialCare a $38,500 monthly fee in exchange for referring Medicaid patients to its unlicensed unit for inpatient detoxification. Referring Medicaid patients for a fee is a violation of state and federal anti-kickback laws as well as Medicaid regulations.

Additionally, state law requires that a hospital obtain an operating certificate from the New York Office of Alcohol and Substance Abuse Services before it can operate a discrete unit to provide chemical dependency services or treatment. A facility can also meet state requirements by holding itself out to the public in a manner indicating chemical dependency program, treatment or service availability.

Schneiderman also alleged that New York Downtown Hospital marketed and provided the services for inpatient detoxification despite not having an operating license to do so, representing a violation of state and federal anti-kickback laws through SpecialCare's referral of patients to the hospital for its New Vision program in exchange for a fee. Schneiderman's lawsuit alleged that the inpatient detoxification services the hospital provided failed to meet professionally recognized standards of care and were not medically necessary.

Whistleblowers Matthew I. Gelfand and Enrico Montaperto initially filed complaints under New York's False Claims Act, which authorizes people who have uncovered fraud against the state to file claims on its behalf. Schneiderman's Medicaid Fraud Control Unit and the United States Attorney's Office of False Claims Act followed up on the matter after the whistleblower lawsuit was filed. The two offices worked together to look into the matter and litigate the cases.

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