Summarized below are some recent litigation and dispute matters involving impermissible financial relationships with physicians; including alleged kick-backs, compensation, leasing, and various other arrangements.
The healthcare compliance environment continues to be challenged with complex regulations, increasing qui tam activity, and regulators increasing their efforts to reduce fraud and abuse.
1. United States ex rel. Deshpande, et al. v. The Jamaica Hospital Medical Center, et al. – September, 2017
MediSys Health Network, Inc. allegedly violated the False Claims Act by engaging in alleged improper financial relationship with referring physicians, according to the Justice Department. In this case, the improper financial relationshps occurred in the form of compensation and office lease arrangements that were allegedly not compliant with Stark Law. Stark Law restricts the financial relationships that hospitals may have with referring physicians. MediSys Health settled for $4 million with the DOJ for this whistleblower suit. The lawsuit was filed under the qui tam, or whistleblower provision of the False Claims Act. The claims settled by this agreement are allegations only, and there has been no determination of liability.
2. $1.3 Billion Takedown – July, 2017
The Department of Justice found over 412 individuals, across 41 federal districts, responsible for approximately $1.3 billion in fraud losses due to false billings. This represents the largest health care fraud enforcement action in Department of Justice history. These false billings charged Medicare, Medicaid and TRICARE for unnecessary drug prescriptions and for medications that were never purchased or distributed to the beneficiaries. According to the Department of Justice, patient recruiters, beneficiaries and other co-conspirators were allegedly paid cash kickbacks in return for supplying beneficiary information in order for the providers to then submit fraudulent bills to Medicare for unnecessary medical services or services that were never performed. A complaint, information, or indictment is merely an allegation, as there has been no determination of liability.
3. United States ex rel. Holden v. Mercy Hospital Springfield, et al - May, 2017
Mercy Hospital in Springfield, Missouri settled with the government for $34 million regarding Stark Law violations. The complaint involves Mercy Hospital’s Oncology and Infusion Center, as well as Mercy Clinic, a hospital affiliate consisting of medical oncologists and multiple offices and clinics. In 2009 the infusion center was transferred to Mercy Hospital in order to benefit from the hospital-based 340(b) drug pricing program. It is alleged that, in an effort to keep the oncologists compensation at a similar level that existed prior to the transfer, Mercy Hospital used work relative value units (wRVU) credit as a “margin replacement based on work RVU for drug administration in the hospital department.” The wRVU credit was not based on actual clinical work, or clinical expense. The arrangement was to prevent a loss of income for the medical oncologists associated with Mercy Clinic. It’s further alleged that Mercy Hospital paid management fees to Mercy Clinic for the physician’s management of the infusion center. According to the complaint, the physicians practicing in the cancer clinic, and benefitting financially from the management fees, were not responsible for management of the infusion center. The complaint alleged the arrangement did not meet the fair market value and commercial reasonableness provisions of the Stark Law.
4. US ex rel. Frank Solis v. Millennium, Pharmaceuticals, Inc, et al. – October 2017
Whistleblower Frank Solis asked the Ninth Circuit in September to review a previous whistleblower suit which alleged Merk, Millennium Pharmaceuticals Inc. and Schering-Plough Corp. of paying kickbacks to physicians to promote certain pharmaceuticals. The suit was previously dismissed by a district court who found that the case did not pass the ‘public disclosure bar’ of the False Claims Act. It is alleged that Merck, Millennium Pharmaceuticals Inc. and Schering-Plough Corp. violated the False Claims Act in providing kickbacks to physicians for referring their blood-thinning drugs. The alleged kickbacks came in the form of millions of dollars in grants, speaking engagements and similar gifts such as trips to Hawaii, lavish dinners, and speaking engagements.
5. United States ex rel. Chan v. PAMC, Ltd., et al., - June, 2017
Pacific Alliance Medical Center agreed to pay $42 million to settle these False Claims Act allegations that Pacific Alliance Medical paid kickbacks to referring physicians. Pacific Alliance Medical Center and PAMC Ltd., the owners of the acute care hospital, allegedly paid above market rental rates for space they rented in the physicians’ offices. PAMC Ltd. And Pacific Alliance Medical Center also allegedly had “marketing arrangements that provided undue benefits to physicians’ practices.” The claims settled by this agreement are allegations only, and there has been no determination of liability.
John Meindl, CFA VMG Health
John.meindl@vmghealth.com
Ingrid Aguirre, VMG Health
Ingrid.aguirre@vmghealth.com