Connecticut Hospital and Physician Group Pay Over $150,000 to Settle False Claims Allegations Related to Non-Compliant Office Space Lease
On January 31, 2012, the United States Attorney’s Office for the District of Connecticut announced a $157,830 civil settlement with Bristol Hospital and Bristol Gastroenterology Associates, P.C. (“BGA”) to resolve allegations that Bristol Hospital and BGA violated the False Claims Act.
The Government alleged that Bristol Hospital and BGA improperly billed Medicare during the time period January 2006 to August 2009 during which time the two had a lease arrangement that failed to comply with the Stark Law. According to the Government press release, BGA occupied medical office space owned by Bristol Hospital from January 2006 to December 2007 without a written lease agreement covering the arrangement. BGA also did not pay rent for its use of the space during this time period. In January 2008, Bristol Hospital and BGA entered into a written agreement covering BGA’s use of the space, but BGA did not begin paying rent for the space until August 2009 - 18 months later.
According to the Government, BGA regularly referred Medicare patients to Bristol Hospital during the January 2006 – August 2009 time period, and Bristol Hospital submitted claims to Medicare for services rendered to those patients. Because the Stark Law exception for leases of office space requires that such arrangements between referring physicians and hospitals be in writing and that the rent charged must be consistent with fair market value, BGA’s use of the space owned by Bristol Hospital was not in compliance with the Stark Law. Thus, BGA was prohibited from referring Medicare patients to Bristol Hospital during the time period when the arrangement was not in compliance with the Stark Law, and Bristol Hospital was not permitted to bill Medicare for services rendered pursuant to the prohibited referrals.
The Government’s press release does not indicate how the Government became aware of the noncompliant lease arrangement, but it does not appear that the hospital or BGA self-disclosed the matter, nor was there a formal whistleblower suit filed.
This settlement should remind hospitals to be vigilant in assuring that their lease arrangements with referring physicians comply with the Stark Law exception. Leases with physicians (whether renting to or from referring physicians) must be in writing, signed by both parties, commercially reasonable, and provide for rent that is set in advance and consistent with fair market value.
Home Care Provider Pays $25 Million to Resolve False Claims Allegations of Medically Unnecessary Services
On March 1, 2012, the Department of Justice announced a settlement with Odyssey HealthCare, a subsidiary of Gentiva, under which Odyssey must pay $25 million dollars to resolve allegations that it billed Medicare for medically unnecessary services and for services not rendered.
According to the press release, the Department of Justice alleged that Odyssey billed Medicare for continuous home care, which is the level of care with the highest rate of compensation and is for patients experiencing an acute crisis and his/her symptoms can only be controlled at home through the provision of skilled nursing services, despite the fact that the continuous home care services were not medically necessary or were not provided in accordance with Medicare requirements between January 2006 and January 2009. (The unsealed complaint also alleged that Odyssey had a practice of enrolling and recertifying nonterminally ill patients, but the Department of Justice press release makes no mention of that allegation.)
In addition to the $25 million settlement amount, Odyssey also was required to enter into a 5 year corporate integrity agreement with the Office of Inspector General (“OIG”) in exchange for the OIG’s release of its permissive exclusion authority. The allegations against Odyssey were brought to the Government’s attention in three separate whistleblower actions filed by former employees of Odyssey who will share more than $4.6 million as their share of the settlement. One of the whistleblowers, Jane Tuchalski, a registered nurse, was fired by Odyssey after raising concerns about company operations, and she filed the federal lawsuit against Odyssey. Other Odyssey employees, from Virginia and Texas, later filed their own False Claims Act suits. One was folded into Tuchalski’s case and one was dismissed.
In addition to sharing in the recovery, Ms. Tuchalski reached a separate private settlement with Odyssey over her claim of retaliatory termination. This is not Odyssey’s first settlement with the Government. In 2006, Odyssey paid $12.5 million to resolve false claims allegations filed by another whistleblower, a Wisconsin-based employee fired by Odyssey after she questioned the company's bills to Medicare for hospice services.
This large settlement should serve as a reminder to health care providers that potential whistleblowers are everywhere, and that if an organization isn’t committed to compliance and doing the right thing, others, including insiders such as employees and former employees, may report the organization’s conduct to the Government. The best defense to a potential whistleblower action is to have a strong, effective compliance program and a culture that encourages employees and others to report suspected problems internally.