Consumer Fraud

S.C. Hospital Settles Whistleblower Lawsuit Alleging Unlawful Referral Schemes

Pills Stethascope on Money 435x289 S.C. Hospital Settles Whistleblower Lawsuit Alleging Unlawful Referral SchemesA South Carolina hospital has agreed to pay the U.S. government $17 million to resolve a whistleblower lawsuit alleging that it violated the Physician Self-Referral Law (the Stark Law) and the False Claims Act by engaging in improper financial arrangements with more than two dozen physicians, the U.S. Justice Department said Thursday.

The settlement resolves allegations filed in a False Claims Act lawsuit by Dr. David Hammett, a former physician employed by Lexington Medical Center, in federal court in Columbia, S.C. Dr. Hammett will receive approximately $4.5 million of the recovery amount as a whistleblower award, the Justice Department said.

The complaint alleged that the Lexington County Health Services District Inc. (Lexington Medical Center) of Columbia, S.C., entered into asset-purchase agreements with 28 physicians for the acquisition of physician practices or employment agreements that violated the Stark Law because they took into account the volume or value of physician referrals, were not commercially reasonable, and provided compensation in excess of fair market value.

The purpose of the Stark Law is to ensure that physician referrals are based on the medical needs of patients and not influenced by improper financial arrangements. The law generally forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital unless that relationship falls within one or more of the exceptions.

The exceptions generally require, among other things, that the financial arrangements do not exceed fair market value, do not take into account the volume or value of any referrals, and are commercially reasonable. Arrangements with physicians who are not hospital employees must be detailed in writing and satisfy a number of other requirements that shield referrals from financial considerations.

“This case demonstrates the United States’ commitment to ensuring that doctors who refer Medicare beneficiaries to hospitals for procedures, tests and other health services do so only because they believe the service is in the patient’s best interest, and not because the physician stands to gain financially from the referral,” said Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.

In addition to returning $17 million to the U.S., the settlement also requires Lexington Medical Center to enter a Corporate Integrity Agreement with the Department of Health and Human Services, requiring it to take specific measures designed to avoid or promptly detect unlawful activity and misconduct in the future.

Source: U.S. Department of Justice