The suit alleges that specialists at Wheeling Hospital were paid exorbitant salaries of more than $1 million per year because their referrals generated downstream revenue for the hospital.
Federal prosecutors have taken up a whistleblower lawsuit alleging that a West Virginia hospital, its management company, and CEO paid illegal kickbacks to physicians for patient referrals.
The Department of Justice alleges that nonprofit Wheeling Hospital Inc., violated the Stark Law and Anti-Kickback Statute, and that those violations were caused by R & V Associates Ltd., Wheeling's contracted management consultant, and Wheeling CEO Ronald Violi, who prosecutors allege had "dictatorial control" of the compensation agreements.
According to the suit, the 247-bed Wheeling Hospital had lost $50 million in the seven years before Violi and R&V took over management in 2005.
The managers quickly turned the hospital "into an extremely profitable venture. However, several of the arrangements that drove this newfound excessive profitability were illegal."
"Wheeling Hospital's dramatic revenue increase was accomplished by entering into lucrative but improper compensation arrangements with physicians that were well above fair market value, took into account the value or volume of services and/or were not commercially reasonable, in order to gain the physicians' referrals," the suit claims.
Prosecutors said that OB/GYNs, cardiologists, radiation oncologists and other specialists were overpaid exorbitant salaries—in some cases more than $1 million per year—because their referrals generated downstream revenue for the hospital.
Ultimately, some of those downstream revenues were reimbursed by Medicare or Medicaid.
The suit was filed in U.S. District Court for the Western District of Pennsylvania.
"Improper financial arrangements between hospitals and physicians can influence the type and amount of healthcare that is provided," said Assistant Attorney General Jody Hunt of the Department of Justice's Civil Division.
"The Department is committed to taking action to eliminate improper inducements that can corrupt the integrity of physician decision-making and drive up healthcare costs," he said.
The complaint is contained in a lawsuit filed under the whistleblower provisions of the False Claims Act that authorize private parties to sue on behalf of the federal government for false claims and share in any recovery. The whistleblower, Louis Longo, was an executive vice president at the hospital from 2011 to 2015.
The law permits the federal government to intervene and take over the lawsuit, as it did here in part.
Wheeling Hospital Responds
A Wheeling Hospital executive called the DOJ's suit an "unwarranted attack on what the hospital stands for and the ethics by which it operates."
"As we have said before, the allegations in this lawsuit are simply not true and an unfair attack on our hospital, our values and our dedicated physicians who partner with us to provide care to our community," said Gregg Warren, the hospital's vice president of marketing and public relations.
"We stand by our physicians and will aggressively defend against these baseless and unsubstantiated claims, while remaining fully committed to providing world-class care to the citizens of Wheeling and the Upper Ohio Valley every day," he said.
"We are particularly disappointed that the U.S. government chose to file its claims against our hospital in Pennsylvania rather than in Wheeling," Warren said. "Our community, our employees and loyal patients deserve to have the case litigated in West Virginia, where our hospital is located and our physicians provide care."
“Wheeling Hospital's dramatic revenue increase was accomplished by entering into lucrative but improper compensation arrangements with physicians.”
Department of Justice, in a court filing.
John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.
Photo credit: West Virginia Hospital, CEO Face Kickback Allegations
Federal prosecutors claim that executives at Wheeling Hospital turned the financially struggling hospital 'into an extremely profitable venture' using illegal financial relationships with physicians.
Wheeling Hospital officials called the DOJ's suit an 'unwarranted attack on what the hospital stands for and the ethics by which it operates.'