Why it matters: September 2015 saw the announcement by the DOJ of three major settlements with healthcare providers involving violations of both the Stark Law (relating to improper compensation arrangements with referring physicians) and the False Claims Act (triggered by the Stark Law violations and involving the fraudulent billing of Medicare and Medicaid for the referring physicians' services). These cases are illustrative of the government's continuing emphasis on combating healthcare fraud, including specifically Medicare and Medicaid financial fraud, through the efforts of its Health Care Fraud Prevention and Enforcement Action Team (established in 2009 as a partnership between the DOJ and the Office of Health and Human Services). Read on for the details.
Detailed discussion: In September 2015, the DOJ announced three settlements with healthcare providers involving violations of the Physician Self-Referral Law (known as the Stark Law) and resulting false billing allegations under the False Claims Act (FCA). All three of the cases were brought under the qui tam whistleblower provisions of the FCA, which permit private citizens to bring suit on behalf of the government for alleged false claims and share in the proceeds of any recovery. To briefly recap the relevant statutes, the Stark Law prohibits physicians from referring patients to receive "designated health services" (including tests and procedures) payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship (unless a stated exception applies). As used in the Stark Law, and relevant to the cases discussed here, a "financial relationship" includes bonus and other compensation arrangements paid to a physician based on such referrals. Moreover, a Stark Law violation will usually trigger a violation under the FCA, which makes it illegal for an entity to submit claims for payment to Medicare or Medicaid that it "knows or should know" are false or fraudulent. In the press release for the Adventist Health System settlement (discussed below), DOJ Civil Division head Benjamin C. Mizer summed up the issue as follows: "Unlawful financial arrangements between health care providers and their referral sources raise concerns about physician independence and objectivity. Patients are entitled to be sure that the care they receive is based on their actual medical needs rather than the financial interests of their physician." As you will see, in each of the cases discussed below, the local U.S. Attorney has taken up the government's FCA/Stark Law enforcement drumbeat with great gusto.
Adventist Health System: On September 21, 2015, the DOJ announced that Adventist Health System (Adventist), a Florida-based healthcare system that operates hospitals and other healthcare facilities in 10 states, agreed to pay $115 million to settle allegations that it violated the FCA by submitting false claims to Medicare and Medicaid. The allegations centered around "improper compensation arrangements" Adventist had with its physicians, pursuant to which Medicare and Medicaid were fraudulently billed "for services rendered to patients referred by employed physicians who received bonuses based on a formula that improperly took into account the value of the physicians' referrals to Adventist Hospitals." The settlement also resolved allegations that the bills submitted to Medicare and Medicaid for the physician's referred services contained "improper coding modifiers" that resulted in overpayment for the services rendered. The three qui tam whistleblowers' share of the settlement had not yet been determined at press time. In a press release, the acting U.S. Attorney for the Western District of North Carolina said "Adventist-owned hospitals … allegedly paid doctors' bonuses based on the number of tests and procedures they ordered. This type of financial incentive is not only prohibited by law, but can undermine patients' medical care. Would-be violators should take notice that my office will use the False Claims Act to prevent and pursue health care providers that threaten the integrity of our healthcare system and waste taxpayer dollars."
North Broward Hospital District: On September 15, 2015, the DOJ announced that North Broward Hospital District (North Broward), described as a "special taxing district that operates hospitals and other health care facilities in Broward County, Florida," agreed to pay $69.5 million to settle allegations that it had violated the FCA by maintaining "improper financial relationships" with nine of its physician employees by compensating them "beyond the fair market value of their services" in violation of the Stark Law, and then fraudulently billing Medicare and Medicaid for such services. The physician qui tam whistleblower was awarded approximately $12 million for his share of the settlement. The U.S. Attorney said in the press release that "[o]ur citizens deserve medical treatment uncorrupted by excessive salaries paid to physicians as a reward for the referral of business rather than the provision of the highest quality healthcare. This office will be steadfast in continuing to devote all necessary resources to ensure that anyone rendering medical care does so for the sole benefit of the patient and in compliance with the law."
Columbus Regional Healthcare System: On September 4, 2015, the DOJ announced that Georgia-based Columbus Regional Healthcare System (Columbus Regional) and Dr. Andrew Pippas (Pippas) agreed to pay $25 million (with additional conditional payments of up to $10 million) and $425,000, respectively, to settle allegations that they violated the FCA by submitting fraudulent claims to Medicare and Medicaid. The fraudulent claims allegedly arose out of the "excessive salary and directorship payments" paid by Columbus Regional to Pippas from 2003-2013 in violation of the Stark Law. The settlement also resolved allegations that, from 2006-2013, Columbus Regional and Pippas submitted claims for payment to Medicare and Medicaid for services at higher levels than supported by the documentation, including claims submitted between 2010-2012 for radiation therapy at higher levels than what was actually provided. The press release provides that a portion of the total settlement money being paid by Columbus Regional and Pippas will go to the State of Georgia to cover its share of the Medicaid losses. Columbus Regional also agreed as part of the settlement to enter into a "corporate integrity agreement" with the Office of Health and Human Services—Office of the Inspector General that requires Columbus Regional to implement measures "designed to avoid or promptly detect future conduct" that would, as it did in this case, run afoul of the Stark Law and FCA. As of press time, the qui tam whistleblower's award had not yet been determined. In the press release, the U.S. Attorney said "[t]he maximum amount of this settlement, some $35 million, is appropriate given the number of alleged violations involving the False Claims Act and the Stark Act. Access to health care is on everyone's mind, especially with respect to rural communities. The type of conduct alleged in this case puts that access at risk. This settlement reflects on the one hand, the Department of Justice's commitment to make sure that hospitals and physicians who commit violations of federal law are held to account, and on the other hand, especially with the requirement of the monitoring agreement, makes sure that we continue to have appropriately functioning health care providers accessible to the wide array of communities they serve."
See here to read the DOJ's 9/21/15 press release titled "Adventist Health System Agrees to Pay $115 Million to Settle False Claims Act Allegations."
See here to read the DOJ's 9/15/15 press release titled "Florida Hospital District Agrees to Pay United States $69.5 Million to Settle False Claims Act Allegations."
See here to read the DOJ's 9/4/15 press release titled "Georgia Hospital System and Physician to Pay More Than $25 Million to Settle Alleged False Claims Act and Stark Law Violations."