Despite the pandemic, the Department of Justice (“DOJ”) is continuing to investigate allegations of health care fraud. Wheeling Hospital, a West Virginia nonprofit, recently agreed to a $50 million settlement with the DOJ to resolve alleged violations of the False Claims Act. In this case, a whistleblower alleged that Wheeling Hospital violated the False Claims Act, from 2007 to 2020, by submitting claims to Medicare which resulted from violations of the Stark Law and the Anti-Kickback Statute.

Under the Stark Law, a hospital is prohibited from submitting Medicare claims for designated health services based on patient referrals from physicians having an improper financial relationship with the hospital. The Anti-Kickback Statute prohibits the payment or acceptance of kickbacks to induce or reward any person for referring, recommending or arranging for the purchase of any item or service for which payment may be made under a federal health care program.

Due to financial stress, Wheeling Hospital engaged R&V Associates, a business consulting and crisis management company, to help Wheeling Hospital become more profitable. Under the arrangement, Wheeling Hospital successfully reduced its losses and steadily turned the hospital into an extremely profitable venture. However, Wheeling Hospital’s success was allegedly due, in large part, to improper compensation arrangements with physicians that took into account the volume or value of services provided by each physician.

The complaint indicated that Wheeling Hospital provided compensation to certain physicians which was in excess of the 90th percentile as identified in the applicable MGMA survey to ensure that the physicians would refer their patients to the hospital. Although these compensation arrangements resulted in loss to their respective practice groups, Wheeling Hospital was willing to absorb the loss to protect the downstream revenue each of the physicians provided to the hospital. Wheeling Hospital tracked the compensation paid to each physician as well as the amount of money each physician generated for the hospital.

The DOJ alleged that these improper compensation arrangements violated the Stark Law and the Anti-Kickback Statute by paying above fair market value compensation to certain referring physicians to ensure that those physicians would continue to refer to the hospital and to serve as a significant revenue source.

Other alleged improper compensation arrangements identified in the complaint included the sharing of hospital technical fees with a contracted pain management physician and overpaying for a leased MRI machine which was partly owned by contracted radiologists who provided services at Wheeling Hospital.

This recent settlement serves as a reminder to hospitals to review their physician compensation arrangements to ensure that they are within fair market value and considered commercially reasonable.