Where does the Government lose the most money to fraud? Dirty defense contractors?
Highway contractors who skimp on the ingredients for asphalt?
Nope. Healthcare fraud is dominating the False Claims Act cases. In one
case, a hospital was even accused of doing unnecessary heart catheterizations
just to make money.
The False Claims Act is a statute designed to give the Government the
ability to combat fraud by persuading whistleblowers to come forward with
information about someone who is cheating the Government. Last year the
Government recovered hundreds of millions of dollars thanks to the False
Claims Act, and a shocking percentage came from healthcare fraud. Healthcare
fraud takes many forms, of course, and I have been describing the settlements
and verdicts from 2014 that related to fraud under the Stark Act.
The Stark Act prevents hospitals and other healthcare providers from paying
(read: bribing) doctors to send patients their way. For obvious reasons,
none of us want to think that our doctor is referring us to a particular
hospital, or giving us a certain medicine, just in order to line his own
pocket. The Stark Act makes it illegal to do the thing that all of us
already thought wasn’t/shouldn’t be happening.
The Stark Act hasn’t stopped all of the fraud, unfortunately, but
at least now we have a standard that is being violated. Here are the 2014
False Claims Act settlements and verdicts where hospitals were accused
of paying their employee-physicians to drum up business.
Ashland Hospital Corp. d/b/a
King’s Daughters Medical Center – $40.9 million
One of the most important Stark Act settlements of 2014 involved a Kentucky
hospital where cardiologists were accused of falsifying patient medical
records to make it look as if patients needed coronary stents and diagnostic
catheterizations — when in fact they did not. The Government said
that the hospital was paying these “play along” physicians
excessive salaries that were above fair market value. Ashland Hospital
Corp. D/b/a/ King’s Daughters Medical Center paid the Government
$40.9 million to settle the accusations.
The Kings Daughter case was important not just because it generated a big
settlement and the return of a lot of dollars to U.S. and Kentucky taxpayers,
but also because it demonstrates why the Stark Act had to be passed in
the first place. These Stark Act allegations were not just academic questions
about the “appearance of impropriety” and whether it “looked
bad” if doctors took excessive pay from a hospital. Here the Government
alleged that the violations went to fruition, resulting in the worst possible
scenario: unnecessary or excessive medical care that put patients at risk.
As U.S. Attorney Harvey said: “Treatment decisions motivated by
financial gain undermine public confidence in our health care system and
threaten vital federal programs upon which so many of our citizens rely.”
St. Mary Medical Center – $2.3 million
A Pennsylvania hospital, St. Mary’s, informed the Government that
it had overpaid 15 physician recruits. St. Mary’s recruitment contracts
had income guarantee agreements, which meant that the hospital guaranteed
that the new physician hires would make a certain amount. However, the
hospital said that it actually had overpaid the doctors under these contracts
because it “failed to properly administer the terms” of the
contracts. According to the settlement agreement between the U.S. And
St. Mary’s, the Government contended that St. Mary’s had overpaid
the physicians, and had never asked the physicians to return the extra
money that had been paid. The hospital had overpaid ten of the physicians
for three years, four had been overpaid for more than five years, and
one doctor had been overpaid for two years.
All Children’s Hospital, Pediatric Physician Services, and All Children’s Health System – $7 million
A St. Petersburg, Florida, healthcare organization paid a total of $7
million — $4 million to resolve a False Claims Act case brought
by a whistleblower. The money was split between the federal government,
which received $4 million and the State of Florida, which received $3
million. The whistleblower in the suit was a former director of physician
staffing at Pediatric Physician Services, Inc., a subsidiary of All Children’s
Hospital that recruited physicians for the hospital. She filed a False
Claim Act suit, telling the Government that All Children’s was violating
the Stark Act when it made compensation agreements with some of the physicians
it hired. My good friends at the James Hoyer Law Firm represented the
whistleblower and resolved this case. The whistleblower beat back a motion
to dismiss the claim, and ultimately received a 26.5% relator’s
share of what the Government recovered due to their efforts.