Arent Fox’s Linda Baumann and a team of attorneys from the firm’s health care and litigation groups just finalized a very favorable settlement agreement in a False Claims Act case for our client St. Joseph's Healthcare System in New Jersey. A whistleblower had alleged that the hospital violated Medicare's outlier payment rules and sought $75 million dollars plus penalties from the hospital. Arent Fox settled the case for only $1.75 million and, significantly, the hospital was not subject to a Corporate Integrity Agreement (CIA) or other compliance obligations, as is almost always the case.

Medicare's outlier reimbursement rules are extremely complex and, as the settlement recognized, our client does not believe it billed these cases improperly. Nevertheless, the government has extraordinary powers to exclude companies from participation in Medicare and Medicaid, a virtual financial death sentence. Moreover, the costs of litigating this type of case would be extremely high. As a result, the client decided the most prudent course was to seek settlement in order to get the litigation behind them.

“Our client was extremely pleased that we were able to settle the litigation for far less than any other hospital in an outlier case to date.” said Ms. Baumann. “While there have been numerous outlier cases, including a $265 million settlement, the St. Joseph's settlement of $1.75 million is by far the lowest. Disregarding one hospital in bankruptcy (that also had to pay more than St. Joseph's), the settlement amount we negotiated was less than half the next lowest outlier settlement amount. Moreover, St. Joseph's does not have the additional burden, expense and risk of a CIA.”

Arent Fox has extensive experience representing clients in False Claims Act cases. If you have any questions about this Alert or the False Claims Act, please contact:

Linda A. Baumann
baumann.linda@arentfox.com
202.857.6239