According to a settlement announced March 9, 2010, by the Department of Justice, Rush University Medical Center has paid $1.5 million to resolve False Claims Act allegations arising out of a lawsuit filed by an orthopedic surgeon on Rush's medical staff and a former director of real estate. The lawsuit alleged that Rush had entered into several office lease arrangements with multiple individual physicians and medical groups that violated the Stark Act and therefore were false claims under the False Claims Act. According to the Report on Medicare Compliance, Rush was specifically accused of making office lease arrangements with physicians without written, fully-executed leases. Rush also allegedly made certain rent concessions to several physicians and failed to collect rent in a consistent and timely manner.
The Stark Act requires office leases to be in writing, to be signed by the parties, and to specify the premises covered under the lease. In addition, the Stark Act requires the rental charges to be set in advance, consistent with fair market value, and not determined in a manner that takes into account the value of any referrals generated between the parties. If the office lease does not comply with the Stark Act, the leasing physician is unable to make a referral to the hospital for designated health services, and the hospital is unable to bill for the services referred by the leasing physician.
The Rush settlement is a $1.5 million reminder that physician contracts must be closely monitored. Health care entities should routinely conduct an internal Stark Act audit to ensure that all physician contracts meet an applicable Stark Act exception. Health care entities should specifically verify that all arrangements with physicians or physician groups are in writing and fully-executed. Furthermore, health care entities should also periodically review physician contracts to ensure that the terms of the contract are consistent with the actual behavior of the parties. In particular, missed or late rent payments or rent escalators should not be ignored, and late fees and penalties should be assessed if required by the lease agreement.