Hospital to pay $5.5M to settle improper Medicaid payments case

NAPLES — NCH Healthcare System, which operates two Collier County hospitals, has agreed to pay the federal government $5.5 million to settle allegations it made donations to local units of government to improperly fund the state’s share of Medicaid payments to NCH.

The claims resolved by the settlement are allegations only and there has been no determination or admission of liability, according to hospital officials and a statement from the U.S. Department of Justice. The case, the DOJ release states, settles “common law allegations for impermissible Medicaid donations.”

In an email response on the case from the Business Observer, a spokesperson with NCH — a nonprofit that cares for more than 40,500 patients in its two hospitals, NCH Baker Hospital Downtown and NCH North Naples Hospital, with a combined 716 beds and some 700 physicians — says the hospital system "fully cooperated with the DOJ."

"There were other hospitals in Florida similarly situated," added Shawn McConnell, director of marketing and communications at NCH, in the -mail. "This situation dates back to 2014 and 2015, long before the current administration arrived. This settlement is due to a difference of interpretation of the rules. NCH decided to settle instead of going to court, to avoid spending more time and money."

Authorities contend that, between October 2014 and September 2015, “NCH made improper, non-bona fide donations by: (1) providing free nursing and athletic training services to the Collier County School Board; and (2) assuming and paying certain of Collier County’s financial obligations,” the release states.

Both types of donations, officials allege, were designed to increase Medicaid payments received by NCH, without any actual expenditure of state or local funds. “In particular, NCH’s donations freed up funds for the county and school board to make payments to the state as the state share of Medicaid payments to NCH,” the release states. This state share was “matched” by the federal government before being returned to NCH as Medicaid payments.

“The Medicaid payments NCH received were thus funded by the federal government and NCH’s own donations, in violation of the prohibition on non-bona fide donations,” the release states.

The Florida Medicaid program provides medical assistance to low-income individuals and individuals with disabilities, and is jointly funded by the federal and state governments. Under federal law, Florida’s share of Medicaid payments must consist of state or local government funds, and not “non-bona fide donations” from private health care providers, such as hospitals. A non-bona fide donation is a payment — in cash or in kind — from a private provider to a governmental entity that is then returned to the private provider as the state share of Medicaid.

The private provider’s donation triggers a corresponding federal expenditure for the federal share of Medicaid, government officials say, which is also paid to the private provider. “This unlawful conduct causes federal expenditures to increase without any corresponding increase in state expenditures, since the state share of the Medicaid payments to the provider comes from and is returned to the provider,” the release states.

The prohibition of this practice, officials say, ensures that states are in fact paying a share of Medicaid payments and thus have an incentive to curb Medicaid costs and prevent unnecessary services.

“States and local units of government must use their own money when seeking federal Medicaid matching funds to help ensure that Medicaid payments are determined by beneficiaries’ medical needs rather than donations by hospitals or other health care providers,” Acting Assistant Attorney General Brian Boynton of the Justice Department’s Civil Division says in the release. “When private parties violate the rules by making improper donations to fund the state share of Medicaid, they endanger the integrity of the Medicaid program.”

“Millions of Floridians depend on the Medicaid Program for medical care and related services,” adds U.S. Attorney Roger Handberg for the Middle District of Florida, in Tampa, in the release. “This settlement underscores our commitment to protecting the integrity of the Medicaid program by ensuring that government funds are legally obtained and used for their intended purposes.” 

The resolution of the case was the result of a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the Middle District of Florida, with assistance from the U.S. Department of Health and Human Services Office of Inspector General.