July 21, 2009
GOVERNOR PATERSON ANNOUNCES RESOLUTION OF DECADE-LONG DISPUTE WITH FEDERAL GOVERNMENT REGARDING THE SCHOOL SUPPORTIVE HEALTH SERVICES PROGRAM
Agreement Permits Program to Continue, Helping School Districts Finance Services for Children with Disabilities
Governor David A. Paterson today announced the settlement of a long-standing dispute with the federal Centers for Medicare and Medicaid Services (CMS), the U.S. Department of Health and Human Services Office of the Inspector General (OIG) and the Department of Justice (DOJ) concerning the School Health Supportive Services (SSHS) program. The settlement resolves the threat of litigation against the State by these federal agencies in furtherance of a whistleblower case brought under the federal False Claims Act in 1998 and ensures that school districts will be able to continue accessing Medicaid funding for services provided to children with disabilities under the program.
“I am pleased to report that we have a resolution on this matter, which has been pending for more than 10 years. While it is unfortunate that State and City funds have to be repaid to the federal government, we believe that this settlement requires payment of approximately $1 billion less than we could potentially have had to pay if the matter had gone to litigation,” Governor Paterson said. “In addition, the settlement ensures that federal Medicaid funding remains available to school districts so they can provide children with disabilities the services they need.”
In 2001, DOJ and OIG initiated an investigation of three upstate school districts and a pre-school program as a result of litigation commenced by a whistleblower under the federal False Claims Act. This investigation provided the impetus for a complete audit of New York’s SSHS program by OIG, particularly with regard to claims originating in New York City. Results of the audit recommended Medicaid disallowances of approximately $1.078 billion, not including interest. In addition, based on the problems identified during the OIG audit, CMS expressed concern about the validity of New York’s SSHS claims for periods after the DOJ audit period, and as of July 1, 2001, began deferring payment on a portion of New York’s quarterly SSHS claims. DOJ and CMS asserted that they would intervene in the existing action or bring a new False Claims Act case.
The State and City have disputed OIG’s grounds for the recommended disallowances and asserted general criticisms of the methodology and presumptions used in the audits. In addition, since the audits were completed, the State has identified and corrected vulnerabilities in recordkeeping, instituting strong protocols for the documentation and submission of SSHS claims by school districts. Nevertheless, the State estimates that the ultimate liability of the State, including the City, in a False Claims Act case could have potentially exceeded $1 billion and might have approached $1.5 billion, with the possibility that some or all of such award could be subject to treble damages.
Accordingly, the State and New York City have entered into an agreement with CMS, OIG and DOJ that calls for restitution of approximately $539.75 million by the State and City. Of that amount, $100 million will be paid by New York City, and the State has already paid approximately $107.9 million. The remainder of the State’s share will be paid in 10 payments of $33.1 million over a five-and-a-half-year period. The agreement also includes a series of releases between the parties and a compliance agreement governing the State’s future participation in the SSHS program.
Services under the SSHS program, which are reimbursed by the federal Medicaid program, are provided to children with disabilities according to each child’s individualized education program or individualized family service plan, established as required by the federal Individuals with Disabilities Education Act. The services are provided by school districts and claims for reimbursement are submitted to and paid by the State, which in turn submits them to CMS for partial reimbursement.
