The former chief hospital executive of Bayonne Medical Center (BMC) in New Jersey has filed a False Claims Act (FCA) lawsuit alleging the hospital and two others owned by CarePoint Health received Provider Relief Fund (PRF) money for patients who didn’t have COVID-19—and failed to return the overpayments. The whistleblower, Vijayant Singh, M.D., alleged he informed the compliance officer that the failure to repay the PRF overpayments was a “severe” risk, but the money stayed put, according to his FCA complaint.[1] Singh also alleged the hospitals used PRF money for reasons unrelated to the pandemic, including a new weight loss center.
This appears to be the first (unsealed) whistleblower complaint alleging a hospital misused PRF money, although the Department of Justice (DOJ) has cracked down on criminals who have flat-out stolen from COVID-19 relief programs, said former CMS chief legal officer Brenna Jenny. There may be more to come because of the magnitude of the money given to hospitals and other providers to help them weather the pandemic storm—$178 billion—and because of the complexity of the rules and reporting requirements, said Jenny, with Sidley Austin in Washington, D.C.
The whistleblower is heavily focused on the receipt of “high-impact” PRF payments by the CarePoint hospitals—BMC, Christ Hospital and Hoboken University Medical Center. “This case arises out of the defendant hospitals’ (a) unlawful refusal to return to the federal government over $50 million in CARES Act Provider Relief Funds, which they had improperly obtained by submitting false claims for reimbursement for diagnosing and treating patients who had not tested positive for COVID-19 and (b) improper use of Provider Relief Funds for purposes unrelated to diagnosing and treating COVID-19 patients,” the complaint alleges.
DOJ declined to intervene in the complaint, and an attorney for the whistleblower has no comment for the time being. What struck attorney Holley Thames Lutz, who's not involved in the case, was the fact that CarePoint internal audits allegedly identified the overpayments and still the hospitals kept the money. But she sees weaknesses in the case. It doesn’t seem to recognize that the definition of a COVID-19-positive patient was fluid early in the pandemic. “It evolved and solidified later,” said Lutz, with Dentons US LLP in Washington, D.C. And the complaint takes too narrow a view of how hospitals were permitted to spend PRF money, contradicting HHS’s own definition, she said.
Singh, the whistleblower, was employed as an adult hospitalist at CarePoint starting March 2012, and worked his way up to chief medical officer (CMO) of BMC by the end of the year and chief hospital executive by 2017. He quit in 2021. The complaint names other defendants, including CarePoint Health Management Associates LLC, which provides professional, administrative and other services to the three hospitals, and the CarePoint CEO and CFO.
The PRF pot of gold was parceled out over time during the darkest days of the pandemic by the HHS Health Resources and Services Administration (HRSA). They made different types of PRF distributions (general and targeted), said attorney Stephanie Murtagh, with Dentons US LLP in Los Angeles. The four “tranches” of general distributions were given to all qualified providers, while targeted distributions went to specific classes, including hospitals, with scores of COVID-19 patients (i.e., high-impact area payments). Providers were required to agree to terms and conditions and sign an attestation that they complied with the terms and conditions—chiefly that they were using PRF money to “prevent, prepare for, and respond to coronavirus” and make up for revenue lost because of the COVID-19 pandemic. Providers also are required to report on their use of the money. The fifth reporting period, which is up next, opens July 1, Murtagh said. The use of PRF funds is being audited by HRSA and the HHS Office of Inspector General.
According to the HRSA website, 959 facilities received $20.7 billion in high-impact area distributions.[2] For the first round, HHS put out a request for information about COVID-19 inpatient admissions and 5,598 hospitals reported 184,037 through April 10, 2020. From this data, HHS identified hospitals with 100 or more admissions and gave them each $76,975 per admission. The second round of high-impact area payments were based on a formula for hospitals with COVID-19 admissions of more than 160 between Jan. 1 and June 10, 2020. HRSA paid $50,000 per eligible admission during that time.
Murtagh noted that high-impact payments weren’t meant to reimburse hospitals for the specific costs of COVID-19 admissions. Instead, the admissions were used as a proxy for the hospital’s lost revenue and higher expenses associated with treating a significant number of COVID-19 inpatients.
If providers received PRF payments in error, they must be returned to HRSA, the complaint explained. That goes for PRF payments that may have exceeded COVID-19-related expenses or lost revenue, or otherwise failed to meet legal and program requirements.
On April 24, 2020, the CarePoint hospitals applied for PRF based on 930 admissions with COVID-19 and received about $76 million. Two months later, the hospitals applied for more money based on 2,452 admissions and got another $51 million. But audits conducted by the CMOs and IT staff found the hospitals allegedly weren’t entitled to about $55 million of the money.
Whistleblower: New Audit, Same Findings
That summer, the whistleblower and several CMOs formed a task force to reconcile the alleged PRF overpayments, according to the complaint. They subsequently met with top executives at CarePoint and the other hospitals, where he allegedly told them an audit confirmed the overpayment amount and that it should be reported and returned to HHS.
The CarePoint CEO allegedly nixed the idea, supposedly saying “no one should take the ‘moral high ground’ because CarePoint was ‘going bankrupt’ and needed the excess Provider Relief Funds,” according to the complaint. In August, Singh emailed the final audit results to the CEO and CFO: CarePoint hospitals sought PRF reimbursement for 2,454 COVID-19 patients even though only 1,240 tested positive. In response, the CMO task force was allegedly told to redo the audit and “consider” patients with suspected (not confirmed) COVID-19.
The whistleblower alleged he pushed back, but did a second audit that confirmed the original findings. CarePoint still allegedly didn’t return the extra money because the three hospitals were in bad financial shape. In March 2020, CarePoint had implemented a reduction in force and started selling assets because of its “poor financial condition.”
Lawyer Doubts An Allegation Will Fly
But in the fall of 2020, the hospitals “went on a spending spree that was inconsistent with their financial condition.” They spent PRF funds on capital expenditures unrelated to diagnosing and treating COVID-19 patients. For example, the complaint alleged Christ Hospital spent PRF money renovating the hospital lobby, a medical office building and its radiology lab; creating a weight loss center; and upgrading its catheter lab and stroke lab. Bayonne Medical Center used PRF money for an innovation center and Hoboken University Medical Center spent some to renovate the lobby, the complaint alleged.
Jenny and Lutz doubt these allegations will fly because the PRF definition of preventing and preparing for COVID-19 was extremely broad. “Providers were permitted to broadly use these PRF payments to cover health care related expenses and/or lost revenues that are attributable to coronavirus,” Jenny noted. The complaint acknowledges this, Lutz added. “I thought that claim was not actionable.”
Jenny suggests providers contact HRSA if they have “legacy questions” about how they used PRF money. The answers are ambiguous in many areas (e.g., the use of money for certain capital expenditures, how the money is allocated with respect to acquisitions or sales) despite HRSA’s efforts to provide guidance by posting FAQs, she said.
CarePoint didn’t respond to RMC’s request for comment.
Contact Jenny at bjenny@sidley.com, Lutz at holley.lutz@dentons.com and Murtagh at stephanie.murtagh@dentons.com.