Whistleblowers and the Government have been using the False Claims Act
to stop hospitals that pay kickbacks to doctors in order to get them to
refer patients to the hospital. But even as the Government is cracking
down and enforcing the Anti-Kickback Statute, some hospitals are resorting
to creative ways to try to keep funneling money to physicians. Some medical
centers have set up elaborate systems using rent as a substitute for direct payments.
Hospitals (and nursing homes, home health agencies, and other healthcare
organizations) have used the rent scheme two different ways. A hospital
that owns property will lease it at super-cheap rates, well below market
value, to physician groups that agree to send patients to the hospital.
Some hospitals have reversed the scheme, leasing property from the doctors
at excessive and inflated rates, again with the intent to put extra cash
in the pockets of friendly doctors who funnel their patients to their
hospital. Either way, paying kickbacks disguised as rent is just as illegal
as forking over cold cash.
St. James Healthcare – $3.85 million
DOJ accused a Butte, Montana, hospital of forking over payments to doctors
who referred patients for care at the hospital. St. James Healthcare was
accused of using a roundabout method to pay for the referrals from physicians
and physician groups. The doctors and St. James hospital entered a joint
venture on a medical office building. St. James owned and operated the
office building, and the Government said it gave financial incentives
to physicians who referred business. The hospital was accused of inflating
the value of the shares in the property that were owned by the doctors,
and then using that ownership value to lower the lease rates the physicians
paid to a below fair market value. On December 31, 2013, DOJ announced
that St. James and its parent company, Sisters of Charity of Leavenworth
Health System of Denver, Colorado, had jointly agreed to pay $3.85 million
to resolve the accusations that they had violated the Anti-Kickback Statute.
The Government said the scheme also violated the Stark Law and the False
West Penn Allegheny – $1.5 million
On March 19, 2014, DOJ announced that a Pennsylvania hospital would pay
more than $1.5 million to settle claims that it violated the False Claims
Act by leasing office space to doctors at artificially cheap rates. DOJ
said that West Penn Allegheny Health System, Inc., had admitted renting
office space to doctors at rates that were below market value in order
to induce the physicians to send their patients to West Penn Allegheny
hospital. DOJ said that because of the scheme, Medicare and Medicaid got
charged for improper reimbursement claims. The hospital, located in the
Bloomfield area of Pittsburgh, Pennsylvania, self-disclosed the violation
of the Anti-Kickback Statute and False Claims Act.
Somerset Medical Center – $435,640
According to the Department of Justice, Somerset Medical Center, a Newark,
New Jersey, medical center, paid inflated rental rates to doctors to persuade
them to send their patients to the medical center. The regional medical
center ponied up $435,640 to settle the allegations that it paid a cardiology
group kickbacks disguised as rent payments. The rent payments that Somerset
made to Medicor Cardiology of Hillsborough, N.J. were unreasonably high,
according to the claims against the Medical Center, and exceeded any fair
market value of the property that Somerset was renting from the group.
The payments were intended to buy business referrals, which is illegal
under the federal Anti-Kickback Statute.