A healthcare company headquartered in Indianapolis has agreed to pay the United States $345 million to resolve allegations that it violated the False Claims Act by knowingly submitting claims to Medicare for services that were referred in violation of the Stark Law, the US Department of Justice’s (DOJ) Office of Public Affairs announced on December 19, 2023. In this lawsuit, the United States alleged that the compensation the company paid to its cardiologists, cardiothoracic surgeons, vascular surgeons, neurosurgeons, and breast surgeons was well above fair market value, that the company awarded bonuses to physicians that were tied to the number of their referrals, and that the company submitted claims to Medicare for services that resulted from these unlawful referrals.
The United States’ complaint alleged that beginning in 2008 and 2009, senior management at the company embarked on an illegal scheme to recruit physicians for employment for the purpose of capturing their lucrative “downstream referrals.” It successfully recruited hundreds of local physicians by paying them salaries that were significantly higher — sometimes as much as double — what they were receiving in their own private practices.
The company was well aware of the Stark Law requirements that the compensation of employed physicians had to be fair market value and could not take into account the volume of referrals. It hired a valuation firm to analyze the compensation it proposed paying to its recruited specialists. The complaint alleged that the company knowingly provided the firm with false compensation figures so that the firm would render a favorable opinion. The complaint further alleged that the company ignored repeated warnings from the valuation firm regarding the legal perils of overcompensating its physicians.
In addition to paying specialists excessive compensation, the complaint alleged that the company awarded incentive compensation to physicians, in the form of certain financial performance bonuses that were based on the physicians reaching a target of referrals to its network, again in violation of the Stark Law.
“Hoosier Medicare patients deserve to know that their care is based on their medical needs, not their doctor’s financial gain,” said US Attorney Zachary A. Myers for the Southern District of Indiana. “When doctors refer patients for CT scans, mammograms or any other medical service, those patients should know the doctor is putting their medical interests first and not their profit margins. [The company] overpaid its doctors. It also paid doctors bonuses based on the amount of extra money the hospital was able to bill Medicare through doctor referrals. Such compensation arrangements erode patient trust and incentivize unnecessary medical services that waste taxpayer dollars. The US Attorney’s Office’s Civil Division, working alongside the US Department of Health and Human Services Office of Inspector General (HHS-OIG) and the DOJ’s Fraud Section are committed to holding companies accountable when they knowingly seek to profit off of Medicare patients through greedy compensation schemes.”
Under the settlement, in addition to paying the United States $345 million, the company will enter into a five-year Corporate Integrity Agreement with HHS-OIG.
Compliance Perspective
Issue
The Physician Self-Referral Law, commonly known as the Stark Law, prohibits healthcare providers from billing Medicare for certain services referred by physicians with whom the provider has an improper financial arrangement, including the payment of compensation that exceeds the fair market value of the services actually provided by the physician. The Stark Law is intended to ensure that medical judgments are not compromised by improper financial inducements. Claims submitted in violation of the Stark Law also contravene the False Claims Act.
Discussion Points
- Review your policies and procedures for operating an effective compliance and ethics program. Ensure that your policies are reviewed at least annually and updated when new information becomes available.
- Train all staff on your compliance and ethics policies and procedures upon hire and at least annually. Include information on how to report concerns and suspected violations, and make sure staff know that prompt reporting is mandatory. Provide education to nursing and business office personnel on their responsibility to identify and report any concerns that unnecessary medications, treatments, supplies, or equipment are being ordered for residents. Document that the trainings occurred and place in each employee’s education file. A program titled Medical Director Contracts in a Nursing Facility is available in the Fraud, Waste, and Abuse Category of MNA for all clients and addresses the Stark Law, Anti-Kickback Statute, and compensation guidelines for physicians.
- Periodically perform audits to ensure all staff are aware of their responsibility to identify and report compliance and ethics concerns and understand that it is their responsibility to report violations to their supervisor, the compliance officer, or via the anonymous hotline. Conduct audits of documentation and billing routinely to prevent and detect errors before they progress to a false claim. Review your Medical Director contract to ensure it meets fair market value compensation and other Safe Harbor guidelines.
*This news alert has been prepared by Med-Net Concepts, LLC for informational purposes only and is not intended to provide legal advice.*
