September 24, 2015 Practice Points

DOJ Reaches $115 Million Settlement with Adventist

Adventist Health System agreed to pay the federal government to resolve potential FCA liability primarily related to allegedly improper compensation arrangements with its employed physicians.

By Andrew A. Kasper

Adventist Health System agreed to pay the federal government $115 million to resolve potential False Claims Act liability primarily related to allegedly improper-compensation arrangements with its employed physicians, the Department of Justice (DOJ) announced September 21, 2015. Adventist also agreed to pay nearly $4 million to four states to extinguish potential liability related to the same conduct.

According to the DOJ, Adventist allegedly “submitted false claims to the Medicare and Medicaid programs for services rendered to patients referred by employed physicians who received bonuses based on a formula that improperly took into account the value of the physicians’ referrals to Adventist hospitals.” Subject to several exceptions and safe harbors, the federal Anti-Kickback Statute makes it unlawful to pay anything of value to induce or reward referrals for services reimbursed by federal healthcare programs. 42 U.S.C. § 1320a-7b. Subject to a number of exceptions, the federal “Stark Law” prohibits physicians from making referrals for certain health services to entities with which the physician has a financial relationship. 42 U.S.C. § 1395nn(a).

The settlement agreement stems from two qui tam actions filed in the U.S. District Court for the Western District of North Carolina. Under the False Claims Act, the four qui tam relators, all of whom worked at an Adventist hospital in Hendersonville, North Carolina, are entitled to a portion of the $115 million settlement. Counsel for the relators said it was the largest healthcare fraud settlement related to physician referrals in history.

The qui tam actions also alleged that Adventist unlawfully (1) submitted “upcoded” claims for medically unnecessary treatment, (2) submitted claims for services provided by doctors lacking proper credentials, (3) submitted separate claims for services that should have been bundled into a single claim, and (4) submitted claims for services not documented in patients’ medical records.

In March, Adventist reached a $5.4 million settlement with DOJ to resolve claims that it provided radiation oncology services to federal health beneficiaries outside of the supervision of radiation oncologists or other qualified providers.

— Andrew A. Kasper, Robinson, Bradshaw & Hinson, P.A., Charlotte, N.C.

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