The largest integrated healthcare network in New York -- North Shore-Long Island Jewish Health System Inc., North Shore University Hospital and Long Island Jewish Medical Center (collectively, North Shore) -- recently agreed to settle an FCA lawsuit for $2.95 million. The settlement is the result of whistleblower allegations that from 1994 through 2001, North Shore obtained reimbursement under Medicare Part A for overhead costs that were not incurred in providing Medicare Part A services. For example, the government alleges that North Shore improperly billed Medicare for expenses related to running a pre-school and operating private physician offices. The government alleged that North Shore provided Medicare with false information, falsely certified its compliance with Medicare rules on the cost report certification page and obtained wrongful reimbursement.

Medicare Part A will reimburse hospitals only for the reasonable costs of services related to the care of Medicare beneficiaries. Under the reasonable cost payment system, hospitals identify costs incurred by categories of expenses called "cost centers." North Shore allocated overhead costs on the basis of certain statistics. The government contends that expenses related to a preschool and private physician office were over-allocated to Medicare reimbursable cost centers and under-allocated to nonreimbursable cost centers. As a result, the government contends Medicare overpaid North Shore.

North Shore did not admit to any wrongdoing or liability. North Shore released a statement indicating that "it opted to settle the claim rather than engage in protracted litigation and incur substantial attorneys' fees that would have far exceeded the cost of the agreement we reached with the government." A former hospital administrator was awarded $560,500 as his relator's share.