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For Immediate Release:  
For Further Information Contact:
July 15, 2005

Office of The Attorney General
- Peter C. Harvey, Attorney General
Division of Criminal Justice
- Vaughn L. McKoy, Director
Office of the Insurance Fraud Prosecutor
- Greta Gooden Brown, Insurance Fraud Prosecutor


John R. Hagerty


Union County Man Pleads Guilty to $40 Million Medicaid Fraud

TRENTON - Attorney General Peter C. Harvey announced that the former Chief Financial Officer at the Mt. Carmel Guild Hospital in Essex County has pleaded guilty to submitting fraudulent Medicaid “cost reports” to the federal and state Medicaid Program. As a result of the fraudulent reports, Medicaid overpaid the hospital nearly $40 million over a five-year period. The Medicaid Program, which is funded by state and federal governments, provides health care services and prescription drugs to persons who may not otherwise be able to afford such services and medicines.

According to Vaughn L. McKoy, Director, Division of Criminal Justice, and Greta Gooden Brown, Insurance Fraud Prosecutor, John Cardillo, 48, Garfield Street, Berkeley Heights, Union County, pleaded guilty before Essex County Superior Court Judge Michael Casale to a criminal Accusation which charged Health Care Claims Fraud. The guilty plea was entered before Judge Casale on July 13. Cardillo faces up to five years in state prison and a fine of up to $15,000 when sentenced on Dec. 2.

Insurance Fraud Prosecutor Brown said that Cardillo, formerly employed as the Chief Financial Officer for Mt. Carmel Guild Hospital, 1160 Raymond Boulevard, Newark, admitted that he knowingly submitted false Medicaid “cost reports” to the Medicaid Program from May, 1999 to April, 2003.

Brown noted that hospitals and nursing homes employ a “cost report” accounting system to determine payments due from Medicaid. “Cost report” accounting considers Medicaid’s proportion of the health care facility’s population and pays that percentage of the facility’s total costs based on the number of Medicaid patients the hospital treats.

Typically, hospitals report the number of Medicaid patients treated over a given period of time to the Division of Medical Assistance and Health Services which reimburses the hospital for provided Medicaid health services. Accurate “cost report” requires both an accurate accounting of costs incurred by the hospital and an accurate accounting of charges made to patients. If costs are inflated or modified, Medicaid pays a higher percentage of hospital expenses. The Accusation charged that Cardillo modified both the total costs and Medicaid’s percentage of the total charges submitted in the hospital’s “cost reports.”

The investigation was conducted by the Division of Criminal Justice - Office of the Insurance Fraud Prosecutor’s Medicaid Fraud Section which investigates and prosecutes civil and criminal Medicaid fraud cases. State Investigator Robert McGrath and Deputy Attorney General Erik W. Daab were assigned to the investigation. James Harris of the Division of Medicaid Assistance and Health Services assisted in the investigation.

“Investigations targeting fraudulent and inflated cost report theft from the Medicaid Program requires a complex and time-consuming financial investigation,” said Insurance Fraud Prosecutor Brown. “These types of financial crimes must be aggressively investigated because such schemes not only involve theft of tax dollars, but also represent a theft from a program designed to assist persons who can not afford health insurance or health care services. Such cases are a priority for the Office of the Insurance Fraud Prosecutor.”


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