To:       All Contractors and Agents

Re:       The Deficit Reduction Act of 2005

VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER is committed to providing the highest quality care to our patients and conducting our business with integrity and in compliance with applicable federal and state laws and regulations.  To this end, we have an extensive Compliance Program in place that we expect all employees and all persons and entities with which we contract to comply.

As a participant in the Medicaid Program, we are obligated to comply with the terms and requirements of the Deficit Reduction Act of 2005 (the “DRA”).  In accordance with the DRA, we have adopted written polices for all employees that provide detailed information about the False Claims Act, the Program Fraud Civil Remedies Act, the relevant state laws, the whistleblower protections under such laws and VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER’S policies for detecting and preventing waste, fraud and abuse.

The DRA also requires that we provide this information to all contractors and agents for your adoption.  Accordingly we are attaching our policies to this memo for your distribution to your employees.

VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER has a no tolerance policy for employees, agents, or vendors who are involved in any unlawful activity.  To that end, we expect that you share our goals of eradicating fraud and abuse and, therefore, will comply with your obligations under the DRA.  If you have any questions regarding these materials, feel free to contact the Corporate Compliance Office at (718) 567-4466.

	Very truly yours,
	Ronald De Franco
	Corporate Compliance Officer

Policy in furtherance of the Deficit Reduction Act Fraud and Abuse Provisions

            VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER is committed to preventing and detecting any fraud, waste, or abuse in their organizations related to Federal and State health care programs.  To this end, VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER maintains a vigorous compliance program and strives to educate its work force on fraud and abuse laws, including the importance of submitting accurate claims and reports to the Federal and State governments.  In furtherance of this policy and to comply with Section 6032 of the Deficit Reduction Act of 2005, VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER provides the following information about its policies and procedures and the role of certain federal and state laws in preventing and detecting fraud, waste and abuse in federal health care programs.

VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER’S Policies and Procedures for Detecting and Preventing Fraud and Abuse

VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER has adopted an extensive set of programs in its facilities for detecting and preventing fraud.  The Compliance Department oversees these programs and depending on the nature of the allegations works collaboratively with the Fiscal Department (internal audits) and the Office of the General Counsel to conduct investigations in these areas.  Compliance policies and procedures are set forth in detail in our compliance plan, which is available at www.vmhny.org, in the Human Resources Department, Executive Offices, and provided to each employee.

As part of the commitment to ethical and legal conduct, employees are required to bring immediately to the attention of their supervisor, Human Resources, the Compliance Officer, the Office of Corporate Compliance or the Legal Department, information regarding suspected improper conduct. Employees may also call the Compliance Help Line at  (718) 567-4466 to discuss concerns about possible violations of the law or institutional policy.  VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER is committed to investigating any such allegation of fraud, waste, or abuse swiftly and thoroughly and will do so through its internal compliance programs and processes.  To ensure that the allegations are fully and fairly investigated, VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER requires that all employees fully cooperate in the investigation.

VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER devotes substantial resources to investigate allegations of fraud and abuse and therefore, believes that all employees should bring their concerns to Victory Memorial Hospital & Skilled Nursing Center first so it can redress and correct any fraudulent activity.  Any employee of VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER who reports such information will have the right and opportunity to do so anonymously and will be protected against retaliation for coming forward with such information both under VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER’S internal compliance policies and procedures and Federal and State law.  However, VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER retains the right to take appropriate action against an employee who has participated in a violation of Federal or State law or hospital policy.

While VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER requires that its employees bring their concerns to VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER certain State and Federal laws discussed more fully below provide that any private citizen may bring their concerns of fraud and abuse directly to the government.  Please note, however, that if an employee never reports his/her concerns through VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER’S internal compliance processes so that VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER can address these concerns, they will be in breach of their duty of loyalty to VICTORY MEMORIAL HOSPITAL & SKILLED NURSING CENTER.

Summary of Federal and State Laws:

The following is a summary of the Federal False Claims Act, the Program Fraud Civil Remedies Act, Whistleblower Protections, and relevant New York State statutes.

The Federal Laws:

1.  The Federal False Claims Act.

The Federal False Claims Act, also known as the Lincoln law, dates back to the Civil War to combat fraud by munition makers who sold defective and overpriced weapons to the Union army.  The law was designed to enhance the government’s ability to identify and recover losses due to fraud by creating strong financial incentives for entities to maintain vigorous compliance programs.  The penalties for violating the statute are severe and range from $5500 to $11,000 for each false claim and up to three times the amount of actual damages that the government proves it sustained as a result of the prohibited conduct. 

An entity or person is liable under the statute if they knowingly submit (or cause to be submitted) to the Federal Government a false claim for payment and from “knowingly” make, use or cause to be made a false record or statement to get a false claim paid by the federal government.  The Act also prohibits a person or entity from conspiring to defraud the government by getting a false claim allowed or paid. 

The term “knowingly” means that a person: 1) has actual knowledge; 2) acts in deliberate ignorance of the truth or falsity of the information; or 3) acts in reckless disregard of the truth or falsity of the information.   The statute also authorizes private citizens to file a lawsuit in the name of the United States.  A case is initiated when the individual files a complaint in federal court, under seal, and serves the Attorney General with a copy of the complaint and any supporting, material evidence.  The government has sixty days to investigate the allegations in the complaint to determine whether it will take over the action and prosecute the claim.  Often the government seeks to extend its time to investigate so that it can make a more educated decision whether to prosecute.  This process can take several additional months or more.  If the government decides to prosecute the case, it will take the lead role and make all subsequent decisions regarding the direction of the prosecution.  If the government chooses not to prosecute the case, the person who filed the action has the ability to pursue the litigation.  The government reserves the right to join the case at a later date if it demonstrates good reason to do so.  As an incentive to bring these cases, the Act provides that the person who files the action may receive between 10% to30% of any monetary recovery, plus reasonable attorneys fees and costs.  This award may be reduced or negated, however, if the court finds that the person filing the case planned and initiated the fraud.  The Act also provides that persons who prosecute clearly frivolous cases can be held liable to the company for its attorney’s fees and costs.

Persons who file these cases, sometimes called “whistleblowers” are provided certain protections against retaliation for bringing a good faith action.  Employees who can establish that they were discharged, demoted, harassed or discriminated against because they pursued an action in good faith are entitled to be made whole, including such relief as reinstatement, double back pay, and/or compensation for any special damages such as reasonable attorneys’ fees.

2.  Federal Program Fraud Civil Remedies Act (“PFCRA”).

This federal law is similar in structure to the False Claims Act, but provides administrative remedies against persons or entities that make or cause to be made a false claim for money, property or services to certain federal agencies including the Department of Health and Human Services, which operates the Medicare and Medicaid programs.   The law provides that any person making, presenting, submitting or causing to submit a claim that the person knows or has reason to know is false, fictitious or fraudulent is subject to civil monetary penalties of up to $5000 per false claim and up to twice the amount of the fraudulent claim.   The PFCRA uses the same definition of “knows or has reason to know” as used in the False Claims Act and explained above.   Violations are investigated by the Department of Health and Human Services and enforcement actions must be approved by the Attorney General.

New York State Laws:

1.  Civil Penalties (NY Social Services Law 145-b).

New York State makes it unlawful to knowingly make a false statement or representation (or by deliberate concealment of any material fact or other fraudulent scheme or device) to attempt to obtain, or to obtain, Medicaid payments for services or supplies furnished under the New York State Medical Assistance Program.  A violation of this law can subject a person or entity, to civil damages equal to three times the amount falsely overstated (or in the case of non-monetary false statements or representations, three times the amount of damages sustained as a result of the violation or $5,000, whichever is greater.)  In addition, the person or entity may be required to pay a civil monetary penalty of up to $2,000 for each item or services as restitution to the Medical Assistance Program if the person or entity knew, or had reason to know that:

• The payment involved the providing or ordering of care, services, or supplies that were medically improper, unnecessary or in excess of the documented medical needs of the person to whom they were furnished;
• The care, services or supplies were not provided as claimed;
• The person who ordered or prescribed care, services or supplies which were medically improper, unnecessary or in excess of the documented medical need of the person to whom they were furnished was suspended or excluded from the Medical Assistance Program at the time the care, services or supplies were furnished; or
• The services or supplies for which payment was received were not, in fact, provided.

2.  Health Care Fraud (Penal Law 177). 

The New York State Penal Law has a specific set of provisions entitled “health care fraud” that impose a range of criminal fines and jail terms depending on the amount of money involved in the fraudulent action.   A person or entity may be prosecuted under these laws if they are acting with intent to defraud a private or public health plan (including, e.g., Medicaid or an HMO), they knowingly and willfully provide materially false information or omit material information for the purpose of receiving payment for health care items or services that they are not otherwise entitled to receive.  Since this is a specific intent crime, the prosecutor must prove beyond a reasonable doubt that the individual had specific intent to commit the crime.  The severity of the penalty for committing this crime corresponds to the amount of payment wrongfully received from a single health plan in a one-year payment.  For example:

• Payments under $3,000 constitute a class “A” misdemeanor;
• Payments between $3,001 to $10,000 constitute a class “E” felony;
• Payments between $10,001 to $50,000 constitute a class “D” felony;
• Payments between $50,0001 to $1,000,000 constitute a class “C” felony; and
• Payments that exceed $1,000,000 constitute a class “B” felony.    

3.  NY False Claims Act (State Finance Law §187-194).

The NY False Claims Act closely tracts the federal False Claims Act. It imposes penalties and fines on individuals and entities that file false or fraudulent claims for payment from any state or local government, including health care programs such as Medicaid. The penalty for filing a false claim is $6,000 -$12,000 per claim and the recoverable damages are between two and three times the value of the amount falsely received. In addition, the false claim filer may have to pay the government's legal fees.  The Act allows private individuals to file lawsuits in state court, just as if they were state or local government parties. If the suit eventually concludes with payments back to the government, the person who started the case can recover 25-30% of the proceeds if the government did not participate in the suit or 15-25% if the government did participate in the suit.

4.  Social Services Law §145-c Sanctions.

If any person applies for or receives public assistance, including Medicaid, by intentionally making a false or misleading statement, or intending to do so, the person's, the person's family's needs are not taken into account for 6 months if a first offense, 12 months if a second (or once if benefits received are over $3,900) and live years for 4 or more offenses.

5.  Social Services Law §145 Penalties.

Any person who submits false statements or deliberately conceals material information in order to receive public assistance, including Medicaid, is guilty of a misdemeanor.

6.  Social Services Law § 366-b. Penalties for Fraudulent Practices.

Any person who obtains or attempts to obtain, for himself or others, medical assistance by means of a false statement, concealment of material facts, impersonation or other fraudulent means is guilty of a Class A misdemeanor.

Any person who, with intent to defraud, presents for payment and false or fraudulent claim for furnishing services, knowingly submits false information to obtain greater Medicaid compensation or knowingly submits false information in order to obtain authorization to provide items or services is guilty of a Class A misdemeanor.

7.  Penal Law Article 155. Larceny.

The crime of larceny applies to a person who, with intent to deprive another of his property, obtains, takes or withholds the property by means of trick, embezzlement, false pretense, false promise, including a scheme to defraud, or other similar behavior. It has been applied to Medicaid fraud cases.

• Fourth degree grand larceny involves property valued over $1,000. It is a Class E felony.
• Third degree grand larceny involves property valued over $3,000. It is a Class D felony.
• Second degree grand larceny involves property valued over $50,000. It is a Class C felony.
• First degree grand larceny involves property valued over $1 million. It is a Class B felony.

8.  Penal Law Article 175. False Written Statements.

Four crimes in this Article relate to filing false information or claims and have been applied in Medicaid fraud prosecutions:

·         §175.05, Falsifying business records involves entering false information, omitting material information or altering an enterprise's business records with the intent to defraud. It is a Class A misdemeanor.

• § 175.10, Falsifying business records in the first degree includes the elements of the §                                       175.05 offense and includes the intent to commit another crime or conceal its commission. It is a Class E felony.
• § 175 .30, Offering a false instrument for filing in the second degree involves presenting a written instrument (including a claim for payment) to a public office knowing that it contains false information. It is a Class A misdemeanor.
• §175.35, Offering a false instrument for filing in the first degree includes the elements of the second degree offense and must include an intent to defraud the state or a political subdivision. It is a Class E felony.

9.  Penal Law Article 176. Insurance Fraud.

Applies to claims for insurance payment, including Medicaid or other health insurance and contains six crimes.

• Insurance Fraud in the 5th degree involves intentionally filing a health insurance claim knowing that it is false. It is a Class A misdemeanor.
• Insurance fraud in the 4th degree is filing a false insurance claim for over $1,000. It is a Class E felony.
• Insurance fraud in the 3rd degree is filing a false insurance claim for over $3,000. It is a Class D felony.
• Insurance fraud in the 2nd degree is filing a false insurance claim for over $50,000. It is a Class C felony.
• Insurance fraud in the 1st degree is filing a false insurance claim for over $1 million. It is a Class B felony.
• Aggravated insurance fraud is committing insurance fraud more than once. It is a Class D felony.

New York State Whistleblower Protections:

10.  NY False Claim Act (State Finance Law §191).

The False Claim Act also provides protection to qui tam relators who are discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of their employment as a result of their furtherance of an action under the Act. Remedies include reinstatement with comparable seniority as the qui tam relator would have had but for the discrimination, two times the amount of any back pay, interest on any back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys' fees.

11.  New York Labor Law §740. 

Under New York’s Labor Law, employers are prevented from taking any retaliatory actions against an employee who in good faith discloses (or threatens to disclose) to a supervisor or to a public body that the employer is violating the law and the violation presents a substantial and specific danger to the public health and safety or constitutes the crime of health care fraud.  To bring an action under this provision, the employee must first bring the alleged violation to the attention of the employer and give the employer a reasonable opportunity to correct the allegedly unlawful practice.  The law allows employees who are the subject of a retaliatory action to bring a civil action in court and seek relief such as injunctive relief to restrain continued retaliation; reinstatement, back-pay and compensation of reasonable costs.  The Act also provides that employees who bring an action without basis in law or fact may be held liable to the employer for its attorney’s fees and costs.

12.  New York Labor Law §741.