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Michigan Hospital to Pay $84.5M to Settle Stark Law, Kickback Claims

By John Commins  
   August 03, 2018

Beaumont says it has cooperated with prosecutors to uncover undue compensation to referring physicians allegedly made before the health system was formed in 2014.  

Detroit-based William Beaumont Hospital will pay $84.5 million to resolve kickback allegations levelled by four former employees in whistleblower lawsuits, the Department of Justice said.

Prosecutors alleged that, between 2004 and 2012, Beaumont hospitals in Royal Oak, Troy, and Grosse Pointe compensated eight physicians with free or substantially discounted office space and employees in exchange for patient referrals, violating the Anti-Kickback Statute and Stark Law.

The health system then allegedly submitted claims for services provided to these illegally referred patients to Medicare, Medicaid and other federally funded healthcare programs in violation of the False Claims Act.

The settlement also resolves claims that Beaumont misrepresented a CT radiology center as a qualified outpatient department in claims to federal healthcare programs.

As a result of this settlement, Beaumont will pay $82.74 million to the federal government and $1.76 million to the state of Michigan. Awards for the four whistleblowers have not yet been determined, DOJ said.

Beaumont has also entered into a five-year Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General.

"This result should impress on the medical community the fact that we will aggressively take action to recover monies wrongfully billed to Medicare, through the remedies provided in the federal False Claims Act," US Attorney Matthew Schneider for the Eastern District of Michigan said in a media release.

"I would like to commend the new leadership at Beaumont Hospital for making things right once its past wrongdoing was brought to its attention by federal investigators," Schneider said.

Beaumont issued a statement on its website noting that the allegations arose before the eight-hospital Beaumont Health was formed in 2014, "which created a new health system with new leadership and a new mission, vision and values." 

"The resolution of these matters, some of which go back to contracts originating 14 years ago, reflects Beaumont Health's commitment to the future of health care in Southeastern Michigan," Beaumont President and CEO John Fox said.

"Since the formation of Beaumont Health in 2014, the new management team has implemented additional compliance and legal review processes to ensure our effective compliance with the complex regulations applicable to health systems and to provide additional assurance that these types of issues do not arise again," Fox said.

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


Three hospitals allegedly gave physicians free or substantially discounted office space and employees in exchange for patient referrals.

Beaumont Health says the alleged kickback scheme occurred before the health system was formed and the current management was in place.

The health system entered into a five-year Corporate Integrity Agreement with HHS.

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