Hospital-Centric Healthcare

Hospital Pays $8.5 Million False Claims Act Settlement in Illegal Joint Venture

April 7, 2014

A hospital’s $8.5 million False Claims Act/Anti-Kickback Statute/Stark Statute settlement underscores the illegality of facility-physician joint ventures such as “company model” and “captive model” arrangements.

Joint ventures between entities or individuals in the position to refer and the entities or individuals which receive those referrals are often disguised kickback arrangements. Medicare and Medicaid claims filed in connection with those illegal joint ventures trigger federal False Claims Act liability.

Last month, Memorial Hospital of Fremont, Ohio entered into a settlement with the government relating to improper financial relationships with referring physicians. One of those relationships involved a pain medicine joint venture.

Although the facts of the improper pain management joint venture varies from the usual company model or captive model anesthesia/pathology/radiology joint ventures that are becoming more prevalent, the result is the same: illegality leading to significant penalties.

In the captive model, a facility or referring physicians purport to employ or subcontract with the providers performing the referred services. In the company model, the facility or the referring physicians establish a controlled entity, the “company,” which then purports to employ or subcontract with the providers performing the referred services. Both types of arrangements are suspect joint ventures.

The settlement agreement entered into between Memorial Hospital and the government will likely result in the criminal prosecution of the individuals involved, including, prominently, the physicians who received the improper remuneration. That’s because, among other things, the settlement agreement covers civil liability only and not penalties or criminal prosecution, and requires the hospital’s cooperation in the investigation of the individuals involved.

Expect to see some hospital administrators and referring physicians doing the “perp walk” soon.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

www.weisspc.com

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