NY City and State Agree to Repay U.S. for Improper Medicaid Claims
July 22, 2009
ALBANY — New York State and New York City officials agreed this week to repay the federal government for more than half a billion dollars in improper Medicaid claims, averting a potential court battle but adding more red ink to the state’s and city’s finances.
The agreement also means that the whistleblower who reported the improper spending, a speech therapist, will receive $10 million of the amount repaid.
The settlement, which federal officials said was the largest recovery of Medicaid funds in history, ends a lengthy dispute with the federal government over whether school districts around the state improperly sought Medicaid payments for speech therapy and other services dating to the early 1990s.
Under the agreement, which was announced Tuesday, the city will repay about $100 million. The state will pay about $332 million in 10 installments over the next five and a half years and will also give up $107.9 million worth of M edicaid claims now owed by the federal government.
The bill comes as Gov. David A. Paterson and Mayor Michael R. Bloomberg are grappling with tight budgets and looming shortfalls. Mr. Paterson is expected to announce this month that the state will need to make significant further budget cuts to avoid running a deficit by the end of the fiscal year, on March 31.
Though neither city nor state officials are required to admit wrongdoing under the agreement, it does require the state’s Department of Education to submit to independent monitoring of its Medicaid-financed programs.
City and state officials had vigorously disputed the federal government’s findings and fought to minimize any repayments.
But in a statement issued Tuesday, Mr. Paterson said, “While it is unfortunate that state and city funds have to be repaid to the federal government, we believe that this settlement requires payment of approximately $1 billion less than we could potentially have had to pay if the matter had gone to litigation.”
Since the 1980s, Medicaid has helped school districts pay for the cost of services like speech therapy and psychological counseling for schoolchildren, including the cost of transportation to therapists’ offices. School districts in New York have been among the most aggressive in the country in seeking such aid: one federal study found that New York accounted for 44 percent of all student health services.
Tuesday’s agreement settled lawsuits filed in the late 1990s by Hedy Cirrincione, a speech therapist working in Watertown, north of Syracuse, that claimed that county and school district officials there had improperly billed Medicaid for services she had pr ovided.
Those lawsuits, filed under the federal False Claims Act, spurred several audits by the Department of Health and Human Services of city and state programs that finance speech therapy and other programs for disabled children. Those audits found substantial potential for fraud, reporting that a vast majority of the claims submitted did not meet federal requirements, and that in many cases there was no evidence that the services had actually been provided.
City and state officials vigorously rejected those findings and characterized the fight with federal officials as merely a technical dispute over reimbursement formulas. They also argued that federal health officials had failed to provide clear guidelines for keeping records of the services provided to school districts.
But with the Department of Justice threatening litigation, officials said, they had chosen to settle rather than risk a judgment that would cost far more.
“Although the city believes that it had substantial defenses to allegations of false claims, this three-way settlement eliminates the risk of far greater payouts, which the federal government and the third-party relator would have pursued through litigation,” said Michael A. Cardozo, a lawyer for the city. “We remain concerned about the threatened use of the False Claims Act to resolve a reimbursement dispute.”
Ms. Cirrincione, as the whistleblower, is to receive $10 million from the settlement under a formula set by federal law.
“The information and cooperation that my client provided led directly to the U.S. Department of Health and Human Services’ audits that ultimately confirmed the statewide billing problems that are the subj ect of this historic settlement,” said David A. Koenigsberg, a lawyer for Ms. Cirrincione. “The value of whistleblower law in repatriating federal dollars back to United States taxpayers should be crystal clear.”