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Doc-owned Hospitals: DOJ Settlement Shows Problems with Corporate Hospital Chains

John Commins, for HealthLeaders Media, November 3, 2009

Physician-owned hospitals today launched a media counteroffensive with news that the Department of Justice reached a $27.5 million settlement with for-profit Universal Health Services and its subsidiaries for violations of the anti-kickback and false claims laws at the corporation's hospitals in McAllen, TX.

In a sharply worded press release, the trade group Physicians Hospitals of America said the DOJ settlement "uncovered the real problem—large, corporate hospitals who now owe millions for their illegal contracting schemes."

"Our opposition has attempted to pass the blame to physician-owned hospitals for cost concerns brought to light by a June 2009 article published in The New Yorker," said PHA Executive Director Molly Sandvig. "As the DOJ settlement demonstrates, that is simply not the case. The problem has never been physician ownership. The real problem lies with big corporate hospital chains."

DOJ announced last week that the whistleblower settlement with UHS' McAllen Hospitals LP, d/b/a South Texas Health System, was prompted by violations of the False Claims Act, the Anti-Kickback Statute, and the Stark Statute between 1999 and 2006 by paying illegal compensation to doctors in order to induce them to refer patients to hospitals within the group. DOJ said STHS entered financial relationships with several doctors and induced them to refer patients to STHS hospitals. The payments were disguised through sham contracts, including medical directorships and lease agreements, according to the DOJ.

STHS declined to comment on Wednesday.

Sandvig says corporate hospital lobbyists have successfully inserted in the House and Senate healthcare reform bills language that attacks physician-owned hospitals.

"Congress is about to be railroaded into punishing innocent physicians who have been trying to bring reform to hospitals by the same type of big hospital corporations that were finally caught in McAllen," Sandvig says.

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