SAVANNAH, Ga. — The federal government has filed a lawsuit against Memorial Health Inc. and an affiliated physicians group for filing allegedly fraudulent claims for Medicare reimbursement that stemmed from improper physician referrals and illegal financial relationships.
The lawsuit, filed in a Savannah federal court, is based on the allegations of a whistleblower lawsuit filed by former Memorial Health President/CEO Phillip Schaengold in April 2011 under the False Claims Act, which allows private individuals to sue on behalf of the U.S. government.
After Memorial Health hired him in June 2009, Mr. Schaengold began a comprehensive analysis of the hospital’s financial losses. That analysis found that in 2007 the hospital had recruited a group of three internal medicine physicians called the Eisenhower Medical Group, led by Dr. Paul S. Bradley, and provided them with salaries and compensation packages that were significantly higher than the market benchmark.
Mr. Schaengold’s lawsuit alleges that Memorial Hospital pursued the physician’s group and overcompensated them in exchange for referrals – an effort, the plaintiff claimed, that was intended to boost patient volume. Such arrangements are prohibited under U.S. anti-kickback laws, which are designed to prevent hospitals and doctors from placing profits over patient care.
When Mr. Schaengold told Memorial Hospital board members and senior leadership in January 2011 that he planned to disclose the arrangement between the hospital and Eisenhower Medical Associates in a mandatory report, he was fired 48 hours later.
The Justice Department chose to intervene in the whistleblower lawsuit and effectively take it over, which the False Claims Act entitles it to do. Whether or not the government chooses to intervene in a False Claims Act does not affect the reward a whistleblower receives under the qui tam provisions of the False Claims Act, which can be as high as 30 percent of any recovery the government makes as a result of the whistleblower’s allegations and evidence.
Memorial Health denies the allegations. According to the Savannah Morning News, the board cited management problems and “a dispute over finances for his removal, specifically a disagreement over responses to board members’ questions involving the health care system’s financial situation.”
Mr. Schaengold also filed an amended lawsuit against Memorial Hospital on August 8, accusing the hospital of firing him in retaliation for trying to correct the hospital’s arrangements with Eisenhower Medical Associates, a violation of federal whistleblower protections.
He seeks reinstatement or twice the amount of back pay and damages in excess of $5 million. For the U.S. government, he seeks three times the amount he alleges the government paid to Memorial Hospital in false claims, about $90 million.