Cabrini Will Pay $3.4 Million To Settle Medicaid Case

Cabrini Medical Center agreed yesterday to pay $3.4 million to settle charges of Medicaid fraud in which the hospital allegedly kicked back millions of dollars to an alcohol and drug treatment consulting firm.

Federal prosecutors alleged that between 1995 and 1999, the hospital, situated in Gramercy Park, colluded with Applied CaseManagement Inc. Prosecutors initially filed charges after a whistleblower employed by an affiliate of the firm, identified as John Reilly, filed a lawsuit in 2000 against the hospital, as well as two other upstate hospitals accused of similar schemes.

In the initial complaint against Cabrini, prosecutors said the hospital retained Applied CaseManagement between 1995 and 1999 to provide administrative services. The hospital actually paid the firm for referrals to its detoxification unit, prosecutors alleged, and illegally accepted Medicaid reimbursements for those patients.

Prosecutors also alleged that between 1995 and 1997, Cabrini operated its detoxification unit without mandatory certification from the Office of Alcoholism and Substance Abuse Services.

The hospital, in a statement released yesterday, said it terminated its contract with Applied CaseManagement in November 1999. "This settlement closes the case. Cabrini Medical Center has made no admissions of guilt," it said.

The hospital will pay the $3.4 million in monthly installments over five years. The settlement is the latest wrinkle for an institution already beset by financial troubles and an uncertain future.

Last year, the Berger Commission, which studies health care in the state, recommended that Cabrini be closed. The hospital, which was founded in 1892 and is sponsored by the Missionary Sisters of the Sacred Heart, rejected the recommendation and vowed to fight efforts to close it.

Yesterday, a lawyer representing Mr. Reilly, David Koenigsberg, said he was pleased with the outcome of the case. "We filed a lawsuit in 2000 alleging that there were kickbacks being paid for Medicaid patients to be referred to three hospitals," he said.

In 2005, Catskill Regional Medical Center agreed to pay a $1.5 settlement over allegations that it accepted patients who had been picked up off the street in New York City and brought upstate for treatment. Also in 2005, Applied CaseManagement settled, as did Mount Vernon Hospital, which agreed to pay $2.65 million to settle claims that it paid $60,000 each month to the consulting firm for delivering patients to its detoxification unit.

"This concludes the case," Mr. Koenigsberg said.