Condell Medical Center in Libertyville has agreed to pay the federal and state governments $36 million under a settlement that resolves the 283-bed hospital’s improper collection of Medicare and Medicaid payments.

The agreement followed Condell’s disclosure of the improper payments and was reached without litigation, U.S. attorney Patrick J. Fitzgerald announced Monday.

The Lake County hospital voluntarily disclosed the improper practices earlier this year after discovering them during the due diligence process as part of its acquisition by Oak Brook-based Advocate Health Care. The violations involved the lease of medical space at below-market rates, improper loans to physicians, and improper payments to doctors.

By voluntarily disclosing the improper practices, Condell avoided a government lawsuit under the federal False Claims Act and was able to negotiate a discounted settlement. The hospital will pay the federal government $33.1 million to resolve claims relating to Medicare patients and pay the state $2.9 million to settle claims relating to Medicaid patients.

“We commend Condell for bringing these practices to our attention,” Fitzgerald said. “We expect health care providers to come forward when they discover issues that could rise to the level of fraud without waiting for us to catch up to them, and when they do so, they may well benefit.”

Condell did not admit liability and agreed to the settlement to avoid the delay, uncertainty, and expense of protracted litigation, according to the agreement.

“We regret that in the past Condell may have been engaged in any practices that were not compliant with the law and remain committed to the highest standards of conduct,” Condell’s chief executive officer Dennis Millirons said in a statement.

Advocate financed its $180 million acquisition with a debt issue. As part of the acquisition agreement, Advocate is financing the expansion of Condell’s emergency department and construction of a 68-bed, private-room addition.

Condell has suffered financially with declining profitability and debt service coverage, as well as light liquidity. Rating analysts had been concerned by the hospital’s past announcement that it found errors or misstatements in its financial statements. 

Advocate for some time has looked at expanding north into Lake County, and the acquisition of Condell, which has $130 million of debt outstanding, will allow the system to save money on construction of a new hospital while expanding its footprint.

Advocate has about $770 million of outstanding debt and is rated AA by Fitch Ratings and Standard & Poor’s and Aa3 by Moody’s Investors Service. Fitch rates Condell BBB and Moody’s rates it Baa2.

Advocate is also now in talks to acquire the 225-bed BroMenn Regional Medical Center, located in Normal. If a deal is reached, it would mark the eight-hospital system’s first expansion outside the Chicago region.

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