By Nate Raymond
NEW YORK (Reuters) - Huron Consulting Group Inc
U.S. District Judge Jed Rakoff in Manhattan ruled against Associates Against Outlier Fraud, which brought the lawsuit under the federal False Claims Act and a similar New York state law.
The lawsuit also named as a defendant Empire HealthChoice Assurance Inc, which acted as the fiscal intermediary that serviced the hospital, St. Vincent Catholic Medical Center, during the time in question.
"We believed from the beginning of the case that the allegations were without merit and are gratified to have the case dismissed with prejudice," said Jennifer Frost Hennagir, a spokeswoman for Huron.
Philip Michael, a lawyer for the whistleblower, said he was disappointed by the decision. "We're examining it to determine what our next step would be," he said.
In its annual report filed February 21, Huron said it had held preliminary settlement talks with Associates Against Outlier Fraud and, as a result, recorded a $1.2 million charge in the second quarter of 2012.
Asked if the settlement offer was still on the table, Hennagir said no.
Adopted during the Civil War era, the False Claims Act allows individuals to bring lawsuits on behalf of the U.S. government against companies that have defrauded it. Those whistleblowers share in any settlement that might result.
The government also has the option to intervene in the lawsuits. It did not in the Huron case, leaving the whistleblower to pursue it on its own.
The lawsuit, filed in 2009, centered on events surrounding the restructuring of St. Vincent Catholic Medical Center and its 2005 bankruptcy filing.
It was filed by Associates Against Outlier Fraud, which is solely owned by Steven Landgraber, who worked as an accountant consultant at St. Vincent's from 2005 to 2006.
According to the lawsuit, St. Vincent's had hired consulting firm Speltz & Weis in 2003 to help turn its business around. Huron later acquired Speltz & Weis in 2005.
The lawsuit contended that Huron caused false claims to be made under Medicaid and Medicare for supplemental reimbursement of unusually high in-patient care costs.
But Rakoff in his decision Tuesday said the whistleblower had been unable to support the fundamental allegation in its complaint with facts or law. Huron's conduct was at worst "bad practice" but not forbidden by regulation or standard practice, he wrote.
"There is, in sum, no law, rule, regulation or fact rendering Huron's submission of outlier-producing bills under these circumstances false or fraudulent," Rakoff said.
A lawyer for Empire did not respond to a request for comment.
The case is United States of America, et al. v. Huron Consulting Group, Inc., et al., U.S. District Court for the Southern District of New York, 09-01800.
(Reporting By Nate Raymond in New York; Editing by Stephen Coates)