The Stark Act addresses a problem that most of us assume could not conceivably
actually be a threat. The Act makes it illegal to bribe a doctor to refer
patients or prescribe certain medicines. Stark makes it clear that doctors
are expected to make diagnoses and refer patients based on the best interests
of the patients, not the heft of their own wallets. Didn’t you think
it was already that way?
I’m a whistleblower lawyer who is cataloging the settlements and
verdicts in False Claims Act cases in 2014. Currently I’m in a series
on the Stark Act.
Unfortunately, as I know from my work as a lawyer representing whistleblowers,
some hospitals have resorted to thinly-disguised payments in order to
hide what they are doing from federal regulations. In an effort to disguise
the payments, some hospitals resorted to trumped up “leasing”
arrangements that either charged a physician dirt-cheap rates for nice
office space, or did the opposite — overpaid the physician for office
space he was leasing. Either way, the Government has cracked down on these
arrangements this year, saying in no uncertain terms that these arrangements
are improper. This year the Government settled three cases where it accused
hospitals of using leasing situations to pay doctors for patient referrals.
[Note: These cases happened in the federal government’s fiscal year
2014, which actually started in the fall of 2013 and ended on September
Somerset Medical Center – $435,640
A physician and a hospital administrator filed a whistleblower claim,
telling the Government that Somerset Medical Center was running afoul
of the Stark Act. After investigation, DOJ said that Somerset was paying
inflated rents to a cardiology group that owned some property Somerset
was renting. According to DOJ, the cardiology group referred many patients
to the Somerset, New Jersey regional medical center. The scheme worked,
per the U.S. Attorney for the District of New Jersey, Paul J. Fishman.
Fishman had a great quote: “Making inflated rental payments to induce
referrals is no better than slipping a doctor an envelope stuffed with
cash,” U.S. Attorney Fishman said. “Kickback arrangements
undermine the physician-patient relationship and can lead to unnecessary
treatment and higher costs. There is no room in our healthcare system
for hospitals that abuse federal health care programs to boost their bottom
line.” The whistleblowers were entitled to receive between 15% and
25% of the amount the Government recovered thanks to their being willing
to courageously step forward to warn the Government about the wrongdoing.
West Penn Allegheny Health Systems, Inc. – $1.5 million
A Pennsylvania hospital paid more than $1.5 million to settle False Claims
Act allegations that it had leased space to doctors at below-market rates.
According to the Department of Justice (“DOJ”), West Penn
Allegheny Health System, Inc., was offering the cheap rental spaces in
order to induce the physicians to send their patients to West Penn Allegheny
Health System, Inc. DOJ said the scheme worked and resulted in “improper
claims” for Medicare reimbursement being submitted by the hospital.
Those improper claims violated the Stark Law and the Anti-Kickback Statute, DOJ said.
St. James Healthcare and Sisters of Charity of Leavenworth Health System – $3.85 million
In December 2013, the Department of Justice announced that a Montana hospital,
St. James Healthcare, and its parent company, Sisters of Charity, agreed
to pay $3.85 million to settle allegations that St. James had violated
both the Anti-Kickback Statute and the Stark Law. St. James had not been
paying physicians directly, but it had been giving doctors “below
fair market value lease rates for the land upon which [their] medical
office building was constructed and other below fair market value arrangements
related to shared facilities, use and maintenance.” The Government
is cracking down on hospitals that give doctors’ indirect incentives,
such as super-cheap rent for their office buildings, free supplies, free
billing services, etc. DOJ’s Assistant Attorney Genera for the Justice
Department’s Civil Division, Stuart F. Delery, explained why: “Improper
financial arrangements between hospitals and physicians not only undermine
the integrity of the decisions that doctors make, they raise the cost
of health care for all of us.” Michael Cotter, the U.S. Attorney
for the District of Montana said that he was encouraged that St. James
had self-disclosed the violations.
The latter two cases were extremely unusual in the False Claims Act arena,
because the hospitals self-disclosed what they had done to the United States.