The U.S. Attorney’s Office for the Southern District of New York recently announced the settlement of a health care False Claims Act case against Beth Israel Medical Center for fraudulently inflating its fees for services provided to Medicare patients in order to obtain larger “outlier payments.” Beth Israel agreed to pay over $13 million to settle the Government’s claims for damages and penalties.
The Beth Israel settlement agreement is noteworthy because it did not include the standard settlement language that defendant “does not admit or deny” the Government’s allegations. Instead, the agreement provides that Beth Israel “admits, acknowledges and accepts responsibility” for certain conduct alleged in the complaint, including selectively increasing charges for services that tended to contribute more to Medicare outlier payments.
SDNY Taking the Lead on Stringent Settlement Requirements
At a recent New York City Bar Association conference, the SDNY Civil Chief, Andrew Schilling, said that his office has for about a year been declining to agree to False Claims Act settlements where the defendant neither admits nor denies the allegations of the complaint. Instead, as in the Beth Israel Medical Center settlement, the office has been requiring the defendant to admit to a core set of facts. Significantly, admission in a settlement agreement of facts that form the basis for the Government’s fraud allegations could have collateral estoppel effect in related cases, could be used against the defendant in future cases, and could be the basis for other consequences such as exclusion from federal programs.
To date, it appears that the SDNY has been taking the lead on adopting this more stringent stance. Time will tell whether other districts will adopt this approach or even whether it could become standard Department of Justice policy.
Last month, in SEC v. Citigroup Global Markets Inc., the Second Circuit observed that a Government requirement that a defendant admit liability “would in most cases undermine any chance for compromise.” The SDNY approach of conditioning False Claims Act settlements on an admission of liability by the defendant will undoubtedly make settlements much more difficult to achieve.