HCA, Inc. has agreed to pay $16.5 million to settle allegations arising under the federal Stark Law and False Claims Act. The settlement relates to a series of financial transactions between HCA, including HCA's Parkridge Medical Center (Parkridge) in Chattanooga, Tennessee, and Diagnostic Associates of Chattanooga (Group), a physician group acquired by HCA in 2007. In conjunction with the acquisition of the Group, Parkridge leased space in a building owned by the Group at rates which were alleged to be commercially unreasonable and excessive. The alleged misconduct also involved release of certain Group members from a separate lease obligation. The government alleged that the favorable lease terms were intended to induce the physician members of the Group to refer patients to HCA facilities.

The federal government will receive $15.7 million of the payment and the State of Tennessee will receive $807,000. Interestingly, the settlement arose as a result of a False Claims Act lawsuit filed by a real estate appraiser who will receive 18.5 percent of the payments.

This settlement illustrates the use of an alleged Stark Law violation to impose False Claims Act liability and underscores the importance of obtaining market appraisals to support lease arrangements between physicians and hospitals.