United States of America, ex rel. Najmuddin Pervez v. Beth Israel Medical Center
Cost Report Fraud
$72.9+ million Settlement

This case settled in November 2005 when Beth Israel Medical Center ("Beth Israel") agreed to pay $72,997,481 to resolve charges that it had defrauded the Government by making false statements in its cost reports in order to inflate the hospital's reimbursement from the Medicare program. The allegations were first brought by a whistleblower, Najmuddin Pervez.

According to the allegations, Beth Israel's Medicare cost reports from 1992 to 2001, intentionally included reimbursable cost items such as salaries, supplies, equipment and administrative overhead that it spent to support medical services provided by hospital physicians in their private out-patient offices. Medicare does not reimburse for costs associated with private practices of hospital physicians. Also, Beth Israel intentionally overstated the costs of its employees' housing and parking on its reimbursable cost reports by failing to apply the rent it had received for the housing and parking as a recovery of cost. Beth Israel failed to establish non-reimbursable cost centers for its fund-raising and marketing costs and under-reported the cost incurred in conjunction with its non-reimbursable methadone maintenance treatment program. This resulted in Beth Israel obtaining inflated reimbursement of its overhead costs.

Beth Israel admitted that from 1995 through 1999, it had obtained inflated reimbursements from Medicare by misrepresenting information in its cost reports related to the operation of its King Highway Division in Brooklyn, New York. Beth Israel had excluded charges for ancillary services (such as radiology or laboratory services) provided to Kings Highway Division out-patients, so to artificially increase its ratio of costs to charges. These charges are reimbursed based on a cost to charge ratio, a ratio of the hospital's total cost for such services over its total (Medicare and non-Medicare) charges for those services. In agreeing to the settlement payment, Beth Israel did not admit any wrongdoing or liability.