Regulation of Medicine
DOJ Announces Two Large False Claims Act Settlements
August 27, 2018
In August, the Department of Justice (DOJ) announced two large settlements under the False Claims Act (FCA) against hospital systems:
The first was with a Detroit-based health system that operates eight hospitals with over 3,300 beds. On August 2, 2018, the health system agreed to pay $84.5 million to settle allegations that it violated the federal Anti-Kickback Statute (AKS) and Stark law, which resulted in the submission of false claims to Medicare, Medicaid, and TRICARE. The government alleged that the health system paid substantially excessive compensation, and provided free staff and free, or below fair market value, office space rentals to eight physicians in exchange for their referrals between 2004 and 2012. The government also alleged that the health system falsely reported that its CT radiology center qualified as an outpatient department in claims submitted for reimbursement from federal health programs. The allegations were first brought in four lawsuits filed under the FCA's qui tam (or whistleblower) provisions. The whistleblowers will each receive a still undetermined share of the $84.5 million the health system pays to the government.
The next day, on August 3, 2018, the DOJ announced that a nationwide hospital system agreed to pay over $61.7 million to settle allegations that the system knowingly submitted false claims for reimbursement to Medicare. The system’s CEO has also agreed to pay over $3.2 million for his role in the matter. The government specifically alleged that, from 2006 to 2013, the hospital system instituted a corporate policy to increase inpatient admissions at 14 hospitals in California. According to the allegations, patients who presented to the emergency departments of these 14 hospitals were improperly diagnosed with conditions that would require more expensive inpatient treatment when less costly outpatient care was more appropriate. The allegations were originally brought to the government’s attention by a former employee of the hospital system. Pursuant to the FCA's qui tam provisions, relator will receive over $17.2 million as her portion of the settlement.
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