Managing Risk

False Claims Act Settlement – Another Lesson for Physicians

January 18, 2016

Please! The next time a hospital tells you that they’ve checked the deal with their lawyers and that it’s okay, don’t take their word for it. They won’t pay your fine and they won’t do your time.

Yes, it’s another week, another settlement by a hospital with the federal government over False Claims Act violations.

Underlying the $3.2-plus million settlement by Tri-City Medical Center of Oceanside, California, which admitted no wrongdoing, were allegations of Stark Law violations.

The Stark Law makes it illegal for a hospital to bill Medicare for certain services referred by physicians with whom the hospital has a financial relationship unless the arrangement falls within one of the law’s specific exceptions. Among other requirements, the exceptions require that financial arrangements not take into account the volume or value of referrals, that they not exceed fair market value, that they they are commercially reasonable, and that they are set out in writing.

The government alleged that Tri-City committed 97 Stark Law violations. Those included five financial arrangements which appeared not to be commercially reasonable or for fair market value with the physician who was once the chief of its medical staff, and 92 with other physicians and groups which did not satisfy an exception to the Stark Law, including those with expired written agreements, agreements missing signatures, or lost agreements.

The flip side of every allegation that a hospital billed for a physician financial arrangement that violates Stark is an allegation against the physician for his or her liability under the statute which include significant fines and exclusion from participation in Federal health care programs.

The take-aways for physicians:

1. Don’t rely on a hospital’s assurance that a financial arrangement satisfies Stark (or any other fraud and abuse law).

2. Get qualified, independent counsel to advise you.

3. Make certain that the underlying agreements are in writing and fully signed.

4. Keep a copy of the agreement in a safe place as if it were a promissory note payable to you for the value of the ability to treat Medicare, Medicaid and other federal health care program patients for the rest of your career – because it is.

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