A few months ago, Beyoncé checked into Lenox Hill Hospital and gave birth to her daughter Blue Ivy. Shortly thereafter, mama, baby, and proud papa Jay-Z a/k/a Sean Corey Carter were on their way home. Unfortunately, whatever favorable press that Lenox Hill Hospital had anticipated proved a miscalculation. The headlines screamed about alleged mistreatment of other maternity patients and depicted the whole situation as an over-the-top excess of the glitterati commandeering a hospital. Although, over time, the truth of the matter seemed far more benign, the hospital found itself on the defensive, as evidenced by this press release :
Lenox Hill Hospital Clears the Record on Beyoncé Birth
January 9, 2012
Lenox Hill Hospital Executive Director Frank Danza issued the following statement in response to inaccurate news media reports regarding the presence of the Carter family at the hospital:
"Lenox Hill Hospital and its staff were delighted to welcome the Carter family for the birth of their firstborn on Saturday evening, but we are troubled by the misinformation being circulated in some news media reports. The suggestion that the couple paid $1.3 million to rent an entire maternity floor is simply not true. The family is housed in an executive suite at the hospital and is being billed the standard rate for those accommodations. Our executive suites are available for any patient, including the food service and amenities provided to the Carter family".
"The family does have its own security detail on site. However, the hospital has been and continues to be in control of managing all security at the facility. We have made every effort to ensure minimal disruption to other families experiencing the births of their own children over the past three days. No security plan that we or the Carter's security team put in place would have prevented or delayed families from gaining access to the Neonatal Intensive Care Unit (NICU), and to date, no families have complained to the hospital about being denied access to the NICU".
"Lenox Hill Hospital takes patient privacy and safety very seriously. And while we congratulate the Carter family on the birth of their child, we value the loyalty of ALL of our patients and always strive to ensure a positive experience, knowing that the birth of a child is a wonderful moment producing memories that last a lifetime."
Oh my! Poor, poor Lenox Hill Hospital. Imagine, some folks had the audacity to criticize an alleged $1.3 million charge for maternity care. Why, that bill wasn't for some mundane maternity floor! Absolutely not!! As the hospital's press release makes clear, " The family is housed in an executive suite at the hospital and is being billed the standard rate for those accommodations…" What idiots would confuse a charge for the generic maternity ward with that for an executive suite? I mean, c'mon people, what did you expect when the world of Hollywood and pop music collides with the world of medicine? From what I hear, Sony and Disney are now in production with Humana, United Health, and WellPoint. It's all hush hush but my anonymous inside sources say that it could be a summer sci-fix 3D epic about Mickey Mouse getting a colonoscopy from aliens.
Everyday at hospitals both big and small, patients who go by both a first and last name collide with the shock of exorbitant medical bills. I'm not talking about the dubious $12 charge for a manually attached adhesive device (that's a ten-cent bandage in real people lingo) but routine billing practices involving Medicare fraud. Although these overcharges are not events worthy of the attention of the paparazzi, consider these recent words of Manhattan U.S. Attorney Preet Bharara:
The Medicare program provides invaluable health care assistance to elderly and disabled Americans. But when hospitals incorrectly bill Medicare, they harm the program and ultimately put that assistance in jeopardy. We will remain vigilant in protecting the integrity of this important program and recovering taxpayer funds from health care institutions that fail to comply with Medicare regulations.
True to his word, Bharara announced on May 4, 2012, that his office had filed a Complaint seeking damages and civil penalties under the False Claims Act and simultaneously settled the civil fraud lawsuit against Lenox Hill Hospital. The Complaintalleged that Lenox Hill had fraudulently inflated its charges for services provided to Medicare patients in order to obtain larger supplemental reimbursement, known as "outlier payments" - payments made by Medicare where the cost of care is unusually high.
Pointedly, prosecutors alleged that from February 21, 2002, through August 7, 2003, Lenox Hill Hospital intentionally raised its room and board charges and manipulated its overall charge structure to make it appear as though its treatment of certain patients was unusually costly, when in fact it was not. From 2002 to 2003, to increase its revenue, the hospital increased its inpatient charges based on revenue models that did not directly take into account the costs of the services provided. Accordingly, the hospital increased its charges during this period to all third-party payors, and the charge increases had a larger impact on Medicare outlier payments as compared to any other single payor.
Unlike many tepid Wall Street settlements entered into by other government prosecutors and regulators in which there is no admission of wrongdoing, the press release issued about this settlement notes that:
LENOX HILL admitted, acknowledged, and accepted responsibility for having increased its charges based on revenue models that did not directly take into account the costs of the services provided, and as a result obtaining Medicare outlier payments it would not otherwise have received.
Good for you Bharara! Maybe you could share your thoughts on extracting an admission of liability from a defendant such as Lenox Hill Hospital with Securities and Exchange Commission Director of Enforcement Khuzami? He seems to think that major banks such as Citigroup should routinely be offered settlements without admitting or denying the facts. As I recently observed in "SEC Files Historic Appeal of Judge Rakoff's Citigroup Settlement Rejection" (" Street Sweeper" December 16, 2011) :
Khuzami further opined that the court was
"incorrect in requiring an admission of facts - or a trial - as a condition of approving a proposed consent judgment, particularly where the agency provided the court with information laying out the reasoned basis for its conclusions. . ."
Khuzami pointedly takes issue with the prospect that the courts would no longer sanction SEC settlements where a defendant does not admit liability. Apparently, Khuzami fears that the detriment of such a judicial prerequisite to approving settlements would over burden the SEC by reducing the number of cases likely to settle and prompting increasing numbers of resource-consuming trials. For Khuzami, a by-product of such a compulsion to resolution by trial would be that:
"other frauds might never be investigated or be investigated more slowly because limited agency resources are tied up in litigating a case that could have been resolved."
Finally, Khuzami seems to bristle at the court's references to the substantial size of Defendant Citigroup. The Director of Enforcement argues that "the law does not permit the Commission to seek penalties based upon a defendant's wealth."
Amazing how US Attorney Bharara negotiates a settlement with Lenox Hill Hospital in which the institution admits to alleged misconduct involving multi-million dollar Medicare fraud but the SEC's Khuzami seems determined to handle Wall Street's miscreants with kid gloves. It doesn't appear that Bharara's policy has resulted in a reduction in investigations or prosecutions - maybe he could offer his insights to the SEC?
Pursuant to the settlement with Bharara's office, Lenox Hill Hospital will pay the United States $11,750,000 within ten days of the settlement to resolve the Government's claims for damages and civil penalties.
When it came to expressing the hospital's outrage about the unfair publicity attendant to the Blue Ivy-Beyonce-JayZ maternity stay, we did manage to learn that Lenox Hill Hospital valued "the loyalty of ALL of our patients and always strive to ensure a positive experience…" Curious as to how Lenox Hill's wordsmith would spin this $11.7 million settlement, I visited institution's Pressroom and, gee, there doesn't appear to be a Press Release posted yet about this federal case and ensuing settlement. Okay, sure, Preet Bharara isn't exactly a rock n' roll or hip hop icon, at least not yet, but word is that he's working on some tracks for upcoming release - I hear from my sources that Preet's Street Beats may go platinum.
Also read about this recent United States Department of Justice Antitrust Division case in which a Manhattan jury convicted four individuals and three corporations for their participation in an eight-year conspiracy, involving kickbacks in excess of $2 million, to defraud New York Presbyterian Hospital: FOUR INDIVIDUALS AND THREE CORPORATIONS CONVICTED FOR ROLES IN WIRE FRAUD CONSPIRACY AT NEW YORK PRESBYTERIAN HOSPITAL (Department of Justice Press Release, February 2, 2012).