New Jersey Doctors Caught Wetting Beaks

Kickback scheme for Medicare, Medicaid grants runs afoul DOJ, N.J. authorities


A major federal grant recipient has agreed to pay millions of dollars to settle allegations that it defrauded Medicare and Medicaid by offering kickbacks to doctors who referred patients to its cardiology program.

New Jersey-based Cooper Health System used appointments to its Cooper Heart Institute Advisory Board (CHIAB) in a scheme to steer more patients to Cooper’s Mid-Atlantic network of hospitals, according to the Justice Department. Each doctor appointed to the board received an $18,000 annual salary for the post.

The appointments were designed in part to induce doctors into, or reward them for, referring patients to Cooper’s network of hospitals, DOJ and the state of New Jersey allege. Cooper subsequently billed Medicare and Medicaid for services rendered as a result of those referrals, in violation of federal and New Jersey anti-kickback laws.

"Federal health care participants, such as Cooper, who run afoul of the prohibitions against kickbacks must be held responsible," said U.S. Attorney Paul J. Fishman in a news release announcing the settlement.

Cooper agreed to pay the federal government $10 million and the state of New Jersey $2.6 million to resolve the allegations.

"After more than three years of extended discussions with government lawyers, we decided, in the best interests of Cooper, to settle our dispute without the admission of wrongdoing to avoid the burdens and uncertainties of a protracted litigation," the company said in a statement. "This allows us to focus our full energies on serving our community."

"It is good news that Cooper did not get away with this," said Peter Flaherty, president of the ethics watchdog group the National Legal and Policy Center.

"Unfortunately, certain provisions of the new healthcare law tend to incentivize kickback schemes such as this. I expect to see more of this kind of fraud, rather than less," Flaherty said.

The violations in question took place between Oct. 1, 2004, and Dec. 31, 2010. Cooper received significant taxpayer money from the Department of Health and Human Services (HHS) through a variety of grant programs during that period.

Cooper received two $1.9 million Obamacare grants through HHS in September 2010 for its Primary Care Residency Expansion program. Cooper boasted that the grants would allow it to hire an additional 14 employees. It is not clear whether any of those employees were involved in the kickback scheme.

Cooper’s Obamacare grants were among 62 HHS handouts to Cooper since 1995, totaling more than $14 million, according to a list on the department’s website. Twenty-eight of those awards, valued at more than $6 million, came during the time frame in which DOJ alleges Cooper was paying illegal kickbacks to doctors.

Asked whether the settlement will alter HHS’s relationship with Cooper going forward, the department’s public affairs office referred questions to the inspector general. An IG spokesperson said Cooper remains eligible for federal grants, and that granting agencies "will make decisions based on application information" going forward.

A whistleblower brought the kickbacks to the government’s attention in 2008. Nicholas DePace, a Delaware Valley cardiologist, was invited to join the Cooper Heart Institute Advisory Board.

"Dr. DePace quickly realized that the CHIAB was a thinly-veiled kickback scheme," according to a statement from his attorneys.

DePace says he will donate a portion of his share of the settlement to the Sisters of Notre Dame and other charitable organizations.

Lachlan Markay   Email | Full Bio | RSS
Lachlan Markay is a staff writer for the Washington Free Beacon. He comes to the Beacon from the Heritage Foundation, where he was the conservative think tank's first investigative reporter. He graduated from Hamilton College in 2009, and currently lives in Washington, D.C. His Twitter handle is @lachlan. His email address is

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