The Stark Truth: Some Healthcare Providers are Paying and Taking Bribes

Healthcare fraud has become so rampant that more than half of False Claims
Act cases are filed against healthcare providers trying to rip off Medicare
and Medicaid. To try to make sense of the more than one hundred FCA cases
that settled or tried last year, I have separated the cases into categories.
For several blogs I will be talking about a particularly disturbing type
of healthcare fraud that the
Stark Act aims to stop.

The Stark Act takes aim at a practice that had become widespread in the
medical industry. Hospitals, pharmaceutical manufacturers and other medical
providers were paying doctors to send them business. Of course, ultimately
that practice drove up the costs of healthcare, as the costs of the bribery
got woven back into the actual costs of providing the services (which
Medicare uses when it calculates the reimbursement rate it will use for
the next year.)

When we go to our doctor, it does not really occur to us that he may not
have our best interests at heart. We assume that he makes his diagnoses
and his recommendations, and prescribes medicine and therapy, based on
what will be best for our health. The Stark Act recognizes how critical
that trust is to the patient-doctor relationship, and it makes those sorts
of payments illegal.

Although the Stark Act made it illegal to pay doctors to send business,
some hospitals haven’t gotten the message. Last year 14 cases —
15% of the False Claims Act cases related to hospitals, pharmacies and
nursing homes that were violating the False Claims Act.

Since the Stark Act generated so many cases, I am going to subdivide the
cases into five categories:

(1) The simplest kind of payoff, of course, is when the hospital or nursing
home makes a direct payment to a doctor based on how much business he refers.

(2) Too-good-to-be-true leasing arrangements that are really disguised
payments to doctors or their physician practices;

(3) Overpaying physician employees as a way of rewarding them for their
referrals to their employer;

(4) Overpaying or undercharging for medical products as a way to put extra
money in the pocket of a physician who is referring patients to a particular
hospital, nursing home, or home health agency;

(5) Hiring physicians or their families for made-up jobs that are designed
to funnel extra money to the physician for referring business;

We will start with one of the cases that involved allegations a hospital
paid a doctor directly for his referrals:

Dr. Devender Batra and Belmont Cardiology, Inc. – $1 million

Dr. Devender Batra and Belmont Cardiology, Inc., were accused of getting
improper payments from East Ohio Regional Hospital and Ohio Valley Medical
Center. The payments were intended to — and did — cause the
two Ohio hospitals to submit false claims to Medicare, according to U.S.
Attorney William J. Ihlenfeld, II. Ihlenfeld noted that “[t]hese
types of prohibited referrals are a significant problem and lead to increased
health care costs for everyone.” Belmont and Dr. Devender, who was
Belmont’s President, settled the Government’s claims for $1,000,000.
In case you wondered why East Ohio Regional and Ohio Valley Medical Center
were not involved in the settlement, it is because they resolved the Stark
Act violation claims against them back in 2011.