The physician self referral law, known as the Stark Law, prohibits referring patients to particular health seRvices with which the physician, or an immediate family member, has a financial relationship. 42 U.S.C Section 1395nn. These referral arrangements are illegal when Medicare or Medicaid dollars are involved and the numbers of these relationships are blossoming as the numbers of Medicare and Medicaid patients are increasing. The more common Stark Law violations involve physician owned imaging services (MRI CT and X-ray) and physician owned labs.
On March 29, 2023, three settlements (collectively, the Settlement) in excess of $69 million dollars total with a regional hospital system (Hospital) and two individual physicians, The Settlement resolves alleged violations of the False Claims Act (FCA), the Anti-Kickback Statute (AKS), and the physician self-referral “Stark” law (Stark Law) between 2006 and 2016 related to various arrangements between the Hospital and physicians (and a physician-owned investment group). The Settlement is notable for both the total dollar value, but also because DOJ pursued individual physicians as part of its resolution; in its press release a DOJ official noted in part that the Settlement “emphasizes [DOJ’s] commitment to pursuing justice against parties on both sides of those relationships—the hospital seeking to influence the physician via certain compensation schemes and the physician accepting the compensation.”
According to DOJ, the Settlement and alleged violations relate to four separate types of relationships involving the Hospital that each bear hallmarks of suspicious arrangements under the AKS and Stark Law:
- Medical director agreements with individual referring physicians between 2006 to 2016 which did not comply with a Stark Law exception or AKS safe harbor;
- A physician employment arrangement between 2006 to 2009 that did not satisfy the Stark Law employment exception;
- An office space rental arrangement with a physician-tenant, where the Hospital allegedly forgave the physician’s rent payments in exchange for referrals; and
- A physician-owned investment entity that purchased large medical equipment to lease to the Hospital received an equipment lease through non-arm’s-length negotiations, allegedly in order to induce referrals.
The Hospital ultimately paid $69 million as part of the Settlement, and the two physicians together paid approximately $750k.
On September 9, 2020, the Department of Justice (DOJ) announced a $50 million settlement with Wheeling Hospital, Inc. of West Virginia to resolve False Claims Act allegations that Wheeling Hospital violated the Anti-Kickback Statute (AKS) and Stark Law. Broadly speaking, the AKS and Stark Law require that physicians’ compensation be based on fair market value and not determined in a manner that takes into account the volume or value of their referrals.
The settlement resolved False Claims Act allegations that were triggered by a qui tam lawsuit brought by a former vice president of Wheeling Hospital who oversaw hospital operations and physician engagements. According to the Complaint, Wheeling Hospital, under its former management, paid several physicians annual compensation in excess of a million dollars based on the volume or value of their referrals. Wheeling Hospital allegedly paid salaries to obstetricians and gynecologists, radiation oncologists, cardiologists, and pain management physicians that were twice the median salary and substantially more than the 90th percentile according to MGMA surveys.
The relator will receive $10 million as his statutory share of the settlement proceeds.
On January 28, 2019, the DOJ announced that Avanti Hospitals LLC in Los Angeles and six of its owners will pay $8.1 million to settle claims that they violated the False Claims Act by submitting false claims to the Medicare and Medicaid programs for medical services referred by a physician who received kickbacks and other improper payments from a hospital owned by Avanti Hospitals LLC. The government alleged that the payments from Avanti Hospitals to a high-referring physician violated the Stark Law and Anti-Kickback Statute.
A former CEO of a hospital owned by Avanti Hospitals had filed suit under the whistleblower provisions of the False Claims Act alleging that Avanti provided compensation to a physician engaged as a medical director that (1) exceeded fair market value, and (2) was an attempt to incentivize him to refer patients to an Avanti-owned hospital.
On February 6, 2019, the DOJ announced that Union General Hospital in Georgia agreed to pay $5,000,000 to resolve allegations that it violated the False Claims Act based on improper financial relationships with referring physicians. The DOJ alleged that the hospital compensated physicians in amounts that were above or inconsistent with fair market value or in a manner that took into account the volume or value of the physician’s referrals.
On March 21, 2019, the United States Department of Justice (DOJ) announced that MedStar Health, a health system in Maryland and Washington, D.C., and two of its hospitals agreed to pay $35 million to settle allegations that they violated the False Claims Act by paying kickbacks to a cardiology group in exchange for patient referrals through a series of professional service agreements, and submitting false claims to Medicare for medically unnecessary cardiology procedures.
The kickback allegations against MedStar were brought by three cardiac surgeons as whistleblowers that the two hospitals owned by MedStar paid kickbacks to referring cardiologists with MidAtlantic Cardiovascular Associates under professional service agreements. The physician whistleblowers alleged that the compensation paid under the professional service agreements to MidAtlantic Cardiovascular Associates were in return for referrals of cardiovascular procedures and interventional cardiology procedures. According to the whistleblowers’ complaint, some of the services promised and paid for by the MedStar hospitals under the professional service agreements were never provided.
The MedStar settlement also resolves the whistleblowers’ allegations that MedStar submitted false claims to Medicare from January 1, 2006 through December 28, 2012 for medically unnecessary stents performed by a physician under the professional service agreement with MidAtlantic Cardiovascular Associates. In a related case, the DOJ entered into a settlement in 2010 with St. Joseph Medical Center that also resolved allegations that another MidAtlantic Cardiovascular Associates physician performed unnecessary stent procedures.
On April 30, 2019, the DOJ announced that a former CEO of Health Management Associates (HMA) agreed to pay $3.46 million to resolve false billing and kickback allegations. This settlement resolved allegations that the hospital former CEO caused HMA to knowingly submit false claims to government healthcare programs by admitting patients that could have been treated on a less costly, outpatient basis. The settlement also resolved allegations that the hospitals CEO caused HMA to pay remuneration to emergency department physicians in return for referrals.
This settlement resolves allegations that the former CEO of this hospital chain caused HMA to pressure emergency department physicians to increase inpatient admissions by recommending admission without regard to medical necessity. The DOJ also alleged that the former hospital chain CEO caused HMA to pay remuneration to EmCare, a physician staffing company, to recommend admission when patients should have been treated on an outpatient basis. The DOJ also alleged that the former HMA CEO caused HMA to make certain bonus payments to EmCare emergency department physicians and tied EmCare’s retention of existing contracts and receipt of new contracts to increase admissions of patients who came to the emergency department.
Unlike the Anti-Kickback Statute, conduct need not be “knowing and willful,” and thus the Stark Law provides for strict liability. Further, while the Anti-Kickback statute essentially covers all federally funded healthcare services and products, the Stark Law only applies to claims paid by Medicare and only for certain services (called “designated health services”), which are defined by regulation. 42 CFR § 411.351.
Individuals with information about Stark Law violations may use The False Claims Act to report the wrongdoing to the Federal or State Government. Under these laws, the whistleblower may be entitled to between 15-30% of what the Government recovers in such lawsuits. JEFFREY NEWMAN IS A WHISTLEBLOWER LAWYER WHOSE FIRM HANDLES FALSE CLAIMS ACT CASES RELATING TO HEALTHCARE FRAUD. HE CAN BE REACHED AT JEFF@JEFFNEWMANLAW.COM OR AT 617-823-3217
