The U.S. Department of Justice recently announced that Silver Lake Hospital, a long-term care hospital in Newark, New Jersey, and some of its investors agreed to pay $30.6 million to settle claims that they violated the False Claims Act (FCA) and the Federal Debt Collection Procedures Act (FDCPA). The hospital allegedly overbilled Medicare by claiming excessive “cost outlier” payments, and then fraudulently transferred money to the investors.

Medicare provides supplemental “cost outlier” reimbursements to hospitals when the cost of care is unusually high. Silver Lake allegedly gamed the cost outlier payment system by rapidly increasing its charges far in excess of actual increases in its costs of providing care, thereby receiving excessive payments from Medicare. The hospital will pay the government over $18.6 million, plus interest, over a five-year period.

Silver Lake’s principal investor, Dr. Richard Lipsky, and Columbus Management South LLC, an entity through which other investors received cash distributions from the hospital, will pay the government $12 million to resolve the FDCPA allegations.