A $39.3 million judgment and the specter of hefty fines hang over Tuomey Healthcare System following a jury's decision that it violated the Stark Law and the False Claims Act. Adventist Health will pay $14.1M to resolve false claims allegations. Both cases were initiated by whistleblowers.
A retrial this week that resulted in a jury's $39.3 million judgment against Sumter, SC-based Tuomey Healthcare System should demonstrate to providers everywhere that federal prosecutors are serious about enforcing anti-kickback laws.
"You look at what happened. This is a small hospital but the government put a lot of resources into this and this could put the hospital out of business and I don't think the government is wild about that," says Al Bassett, an attorney and consultant with Alexandria, VA-based Strategic Management Services LLC,
"There was a trial in 2010. There was an award. A federal appeals court set the verdict aside for a retrial. The government elected to take this to a retrial. In this second go-around you get this verdict and I think people will look at this and say 'look if the government did this to a 242-bed community hospital they will take on anybody.'"
After a four-week trial, the 10-member federal jury in Columbia, SC needed less than five hours to determine that Tuomey violated the Stark Law and the False Claims Act between 2005-2009 with its use of lucrative referral fees for 19 physicians who steered business to the health system. The case was brought forward by a whistleblower.
Tuomey has a month to appeal the ruling, but hospital officials have not said if they will.
In addition to the jury's judgment, the verdict exposes Tuomey to more than $350 million in fines stemming from nearly 22,000 violations of the False Claims Act, which allows the government to claim treble damages. It is not clear, however, whether prosecutors will attempt to collect those fines.
Bassett says law firms and consultants have been warning hospitals for years that anti-kickback statutes in Stark Law represent a significant regulatory risk.
"We have been telling our clients that they need to be very careful about establishing fair market value, about establishing the market need for the relationships with physicians," Bassett says. "They need to have what the government calls an 'arrangements database' where they are monitoring their compliance continually."
As was the case with Tuomey, Bassett says federal prosecutors rely on whistleblowers to ferret out Stark violations.
"It's not like billing. The government is aware of what is being billed to Medicare and Medicaid but the government is not privy to the contracts between hospitals and physicians," he says.
"Typically when there is a problem the government finds out about it through a whistleblower. That is what happened in this case. A physician brought a qui tam action back in 2005. So, this should be a wakeup call that what they have been told by law firms and consultants and the Office of Inspector General is true. This is a high priority."
With the advent of healthcare reform, Bassett says Stark Law violations could become even more prevalent and costly as more hospitals establish relationships with physicians.
"This shows that you need to dot your I's and cross your T's. In all of the contractual relationships with physicians who are in a position to refer patients to the hospital they have to be absolutely certain that they have met all of the requirements of the laws."
Adventist Health Pays $14.1M to Resolve False Claims Allegations
Adventist Health System/West and affiliate White Memorial Medical Center in Los Angeles will pay the federal government and the state of California $14.1 million to settle whistleblower claims that they violated the False Claims Act, DOJ said.
The deal resolves federal prosecutors' claims that Adventist improperly compensated physicians who referred patients to the White Memorial facility by transferring assets, including medical and non-medical supplies and inventory, at less than fair market value. White Memorial also paid referring physicians compensation that prosecutors said was above fair market value to provide teaching services at its family practice residency program, DOJ said.
About $11.5 million of the settlement will be paid back to the Medicare Trust Fund and $2.6 million will be paid to California's Department of Health Care Services, DOJ said.
"Payouts made by hospitals and clinics—as the government alleged in this case—raise substantial concerns about physician independence and objectivity," said Ivan Negroni, special agent in charge of the Office of Inspector General, U.S. Department of Health and Human Services San Francisco region.
"Taxpayers and vulnerable patients rightfully expect such payments to be investigated and pursued."
The whistleblowers in this case will collectively receive $2.8 million of the recovery.
MT Hospitals to Pay $3.95M to Resolve Stark, False Claims Allegations
Two Montana hospitals have agreed to pay nearly $4 million after self-disclosing to the federal government Stark Law and False Claims Act allegations, DOJ announced.
St. Vincent Healthcare in Billings, and Holy Rosary Healthcare in Miles City will pay $3.95 million plus interest to resolve allegations that they gave incentive pay to physicians that made referrals to the hospitals, DOJ said.
Prosecutors alleged that the hospitals paid several physicians incentives that took into account the value or volume of their referrals by improperly including certain designated health services in the formula for calculating physician incentive compensation.
"St. Vincent Healthcare and Holy Rosary Healthcare allegedly put their financial interest ahead of their responsibility to provide cost effective healthcare," Michael W. Cotter, U.S. Attorney for the District of Montana, said in prepared remarks. "This case also demonstrates how the Department of Justice will work with those healthcare providers who disclose their misconduct,"
John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.