Cardiologists Settle False Claims Act Allegations Stemming From Sham Management Agreements with a Hospital

On October 21, 2014, the U.S. Department of Justice (“DOJ“) announced that two Kentucky-based cardiologists agreed to pay $380,000 to resolve qui tam allegations of purported Stark Law and Anti-Kickback Statute violations (thereby resulting in a False Claims Act violation). The cardiologists purportedly entered into sham management agreements with a hospital in exchange for the referral of cardiology and other healthcare services to the hospital. Pursuant to the management agreements, the physicians were paid to provide management services that were, apparently, never performed by the physicians. This particular settlement was based on the physicians’ ability to pay. Additionally, the physicians agreed to enter into integrity agreements with the Department of Health and Human Services, Office of Inspector General, which will “obligate them to undertake substantial internal compliance reforms and to commit to a third-party review of their claims to federal health care programs for the next three years.”

The purpose of the Stark Law and Anti-Kickback Statute is to safeguard against improper financial incentives that compromise a physician’s medical judgment and encourage unnecessary referrals, which in turn increase healthcare costs for federal healthcare programs. This recent settlement highlights that the DOJ is no longer simply focusing just on hospitals and larger entities, but is also now enforcing against physician practices. In fact, on August 14, 2014, the DOJ announced that a New York-based cardiology practice agreed to pay $1,336,636.98, plus interest, to settle allegations that the practice violated the Stark Law, and thereby also violated the False Claims Act. (A summary of this settlement may be viewed here.) Additionally, just a month earlier, the DOJ announced that an Alabama-based health system and a physician practice agreed to pay $24.5 million to resolve False Claims Act allegations stemming from purported violations of the Stark Law and Anti-Kickback Statute. (The DOJ press release may be viewed here.)

These three settlements demonstrate that the federal government is using the full breadth of its power to target entities of all types and sizes – not just hospitals – for Stark Law and Anti-Kickback Statute violations. Physicians and non-hospital providers should take a proactive approach to compliance with these laws. This is a good time for providers to review their practices’ compensation guidelines and financial relationships with hospitals and other providers. In particular, providers who have management contracts with hospitals should ensure that the management services are actually rendered and that there is a bonafide need for those services.

For more information about this topic, please contact Adrienne Dresevic, Esq., or Clinton Mikel, Esq., at (248) 996-8510.

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