The United States filed a complaint in intervention alleging violations of the False Claims Act (FCA) and the Anti-Kickback Statute (AKS) by Methodist Le Bonheur Healthcare (MLH) and Methodist Healthcare Memphis Hospitals (collectively, Methodist), for paying unlawful kickbacks to West Clinic, P.C. (West) in exchange for West’s patient referrals, announced US Attorney Mark H. Wildasin for the Middle District of Tennessee. The government began investigating the wrongdoing alleged in today’s complaint in response to a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act, which allows private citizens with knowledge of false claims to bring civil suits on behalf of the government and to share in any recovery. The qui tam action was initially filed on May 30, 2017, by Jeffrey H. Liebman, the former President of Methodist University Hospital. In December 2019, David M. Stern, M.D., the former Executive Dean and Vice Chancellor at the University of Tennessee Health Sciences Center, who served on the Board of Directors of MLH from 2011 to 2017, joined the lawsuit. Stern was also a member of the Executive Cancer Council and the Steering Committee for the West Cancer Center. The complaint sets forth in detail the unlawful kickbacks, disguised through a sophisticated business integration wherein Methodist purchased substantially all of the outpatient locations of the largest oncology practice in the Memphis area, owned by West. At the time of the arrangement, Methodist lacked a comprehensive cancer treatment center.
By purchasing West’s outpatient locations, Methodist was able to bill Medicare not only for the facility and professional components of outpatient treatment but also for the chemotherapy and other drugs provided, for which Methodist could recoup a staggering discount in costs through the 340B Discount Drug Program, resulting in $50 million in profits to Methodist in one year alone. Methodist knew that it would be a violation of the AKS to compensate West in exchange for the volume or value of referrals to Methodist, yet, as the referrals to Methodist increased over the seven years of the deal, so did Methodist’s payments to West under the management agreement. Methodist also knew that West had not been providing all the management services at all the locations required by the MSA. For the management services West was performing, Methodist often was double-paying West, as it was paying West separately for these services pursuant to other agreements. In sum, Methodist knowingly agreed to pay West millions of dollars in kickbacks for the revenues Methodist expected to, and ultimately did, realize from West’s referrals. The arrangement lasted from January 1, 2012, through December 31, 2018, and continued even after Methodist knew that the United States was investigating these allegations following the filing of the whistleblowers’ lawsuit.
