On September 9, 2011, the Department of Justice (DOJ) announced it was partially intervening in a False Claims Act lawsuit filed against Halifax Hospital Medical Center and the related company, Halifax Staffing, in Daytona Beach, Florida. DOJ had previously declined to intervene in the case in June 2010, apparently because it had not completed its investigation by the time the court forced the Government to make the decision whether to intervene.

The lawsuit, filed by a whistleblower who remains employed as Director of Physician Services for Halifax Staffing, alleges that Halifax's contracts with three neurosurgeons and six medical oncologists were improper, in part, because they either paid physicians more than fair market value, were not commercially reasonable or took into consideration the volume or value of the physicians' referrals.

The whistleblower alleged violations of both the Stark Law and the Anti-Kickback Statute. According to the DOJ’s Memorandum in Support of Motion of the United States to Intervene, “[T]he United States has now determined that it has good cause to intervene concerning defendants’ financial relationships with various physicians, which the government believes violate the Stark law and led to the submission of false claims in violation of the False Claims Act.”

The whistleblower’s complaint also alleges that Halifax Hospital submitted false and fraudulent claims for hospital observation services, one and two day inpatient stays, and three-day inpatient stays with a subsequent discharge to a skilled nursing facility without meeting Medicare criteria for those services. The Government has not intervened with respect to those allegations, however. The DOJ has said it will file its own complaint in the lawsuit by November 8, 2011. The DOJ press release announcing its decision to intervene can be found on the DOJ website

. In the past, it was not common for the Government to intervene after declining to intervene in a whistleblower-filed lawsuit. These types of cases would often linger for years and years before a judge would finally issue a drop-dead deadline for intervening. Generally, the Government had completed its investigation of the allegations by then and could make a decision based on all the facts it expected to gather. However, the courts have recently been pressuring DOJ to make its intervention decisions sooner, often way before their investigations are complete. (In this case, the declination was made less than one year from the date the initial whistleblower complaint was filed!) As a result, DOJ is forced to decline cases prematurely and continue its investigation after the case has been unsealed and revealed publicly. If DOJ later decides to take over part or all of the litigation, the DOJ must make a motion to the court to intervene in the lawsuit, citing the good cause basis for intervening.

Lawsuits like this one against Halifax Hospital should serve as a reminder to hospitals and other health care providers to be vigilant in their relationships with referring physicians. Hospitals that bend the rules in order to keep their referring physicians happy and motivated put themselves at great risk of prosecution by the Government. Hospital management should also be reminded that many times, as in the Halifax Hospital lawsuit, the whistleblower is an insider (here, Director of Physician Services) who recognizes the problems with a particular physician arrangement and decides not to turn a blind eye.

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