Recent False Claims Act Settlements Focus on Stark Violations and Physician Compensation

09/28/2015

In a short three-week period, the U.S. Department of Justice announced three large, multi-million dollar False Claims Act settlements involving Stark Law violations. Each of the three cases alleged that health systems compensated physicians in excess of fair market value, and in excess of collections for services personally performed by those physicians, in order to induce referrals. Although the whistleblowers in each of the cases alleged a broad array of fraud and abuse issues, this summary focuses on those related to physician compensation.

1. Columbus Regional Healthcare System (“CRHS”)

On September 4, 2015, the Department of Justice announced an up to $35 million settlement with CRHS and a $425,000 settlement with one of its employed physicians to resolve allegations of FCA and Stark Law violations. The whistleblower alleged that CRHS compensated its employed physician in excess of fair market value, and in excess of the revenue received on services he personally performed. The whistleblower argued that the compensation only made sense if CRHS factored in the financial benefit of the physician’s referrals. The whistleblower also attacked the physician’s work relative value unit-based compensation model, arguing it encouraged him to document higher level visits than were necessary and allowed him to increase his compensation by improperly billing for services he did not personally perform. Specifically, the whistleblower alleged that the physician billed for non-physician practitioners that were not properly credentialed (as well as another physician) under his own provider number instead of their own.

2. Broward Health (“Broward”)

Weeks later, the Department of Justice announced a record-breaking $69.5 million FCA settlement with Broward based on similar allegations. The whistleblower in this case alleged that Broward engaged in a scheme of over-compensating physicians to generate significant losses, which were offset by profits received from those physicians’ referrals. The whistleblower based these allegations in part on the fact that Broward weighed the volume and value of anticipated referrals when setting physician compensation. The whistleblower further argued that Broward’s “Contribution Margin Reports,” which continually tracked referral profits, further demonstrated that Broward deliberately implemented such a scheme. The settlement marked the largest ever reached without litigation under the Stark Law.

3. Adventist Health System (“Adventist”)

On September 21, the Department of Justice announced an FCA settlement that dwarfed the $69.5 million record set a week earlier, announcing that Adventist had agreed to pay $115 million to settle similar allegations. In two separate complaints, the whistleblowers alleged that Adventist engaged in a scheme to pay excessive compensation to physicians and mid-level providers to induce them to refer patients to Adventist hospitals for inpatient and ancillary services. The whistleblowers focused on Adventist’s historic approach and centralized oversight of such arrangements to argue that its allegations also reached Adventist hospitals not named in the complaints. The complaints stated that overall physician compensation was above fair market value, as evidenced by Adventist’s “substantial and consistent losses” on their physician practices, which were tolerated only because Adventist recovered those losses and profited by capturing referrals. The whistleblowers reasoned that a portion of payments to physicians therefore had to be tied directly to the volume of referrals to Adventist facilities.

Haynes and Boone has extensive experience defending clients in False Claims Act investigations and lawsuits. If you have any questions or would like to discuss these issues further, please visit the False Claims Act/Qui Tam litigation page of the Haynes and Boone, LLP website or contact: 

214.651.5584
 
214.651.5159
 

 
214.651.5480
 
 Kenya Woodruff
214.651.5446
kenya.woodruff@haynesboone.com 


 Taryn McDonald
214.651.5646


 Nicole Somerville
214.651.5474
 
 


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