Santa Fe, New Mexico's St. Vincent Regional Medical Center and its Irving, Texas-based partner Christus Health have agreed to pay $12.24 million plus interest to settle allegations that they made illegal donations to county governments under a discontinued state matching program, and a whistleblower will receive $2.25 million for his or her share of the recovery.

The hospital and Christus allegedly violated the False Claims Act by making illegal payments to New Mexico counties from 2001 to 2009 that were used to fund the state's share of Medicaid payments to the hospital, according to the U.S. Department of Justice. (The DOJ does not specify which counties received the donations.)

Christus spokeswoman said in a statement that both it and the hospital deny the allegations, noting that the claims resolved by the settlement were allegations only and there was no determination of liability. A spokesperson for St. Vincent did not respond to an emailed request for comment Thursday afternoon.

In New Mexico, hospitals in mostly rural communities received supplemental Medicaid funds as part of the state's Sole Community Provider program. Under that initiative, the federal government reimbursed the state for about 75 percent of its health care spending. The program was discontinued in 2014. 

Federal law, however, required that New Mexico's 25 percent matching share of payments under the program come from state or local governments, not from private hospitals. This restriction was designed to curb possible abuse and to ensure that states had sufficient incentive to keep rising Medicaid costs under control.

The False Claims Act lawsuit was filed by a whistleblower, described by the DOJ as a former Los Alamos County, New Mexico, indigent health care administrator. (The case is under seal, so his or her name could not be ascertained.) The whistleblower will receive $2.249 million for his or her share of the recovery.

In addition to denying the allegations, the Christus statement said one of the issues in the False Claims Act lawsuit involved arrangements between the hospital and Santa Fe County for the support of various community health initiatives—arrangements that were "lawful, transparent and a matter of public record, and were well known by all stakeholders."

"We have determined that continued expenditure of time and resources in defense of these allegations is not in the best interests of the Santa Fe community or the hospital," the statement said.

Health care fraud legal experts say that while allegations of hospitals' illegal payments to governments are not unheard of, they are quite rare, simply because matching programs like New Mexico's former one are unusual, so the issue doesn't arise often.

Even so, in-house attorneys at hospitals should ensure that they have advanced knowledge of any organization, government or otherwise, to which the hospital gives money, the lawyers add.

"The rules on this stuff are pretty clear, though I suppose it's possible someone at the hospital didn't know about the prohibition for such donations," Patrick J. Cotter, a former federal prosecutor who heads the government interaction and white-collar practice group at Greensfelder, Hemker & Gale in Chicago, said in an email.