The Business of Healthcare

For Whom the Whistle Blows: Texas County Hospital Settles False Claims Act Suit


Last week, Citizens Medical Center, a county-owned hospital in Victoria, Texas, paid the United States government $21,750,000 to settle, without admitting wrongdoing, a whistleblower suit under the False Claims Act. The whistleblowers, competing physicians, will receive $5,981,250 from the recovery.

The suit alleged underlying violations of the Federal Anti-Kickback Statute and Stark.

Specifically, the relators and the United States alleged, among other things, that Citizens Medical Center paid referring physicians, including ER physicians, cardiologists, gastroenterologists, and urologists, among others, compensation in excess of fair market value, both in dollars and in the discounted value of items received. They also alleged that remuneration varied in proportion to referrals.

Citizens Medical Center had defended by arguing that its relationships with the referring physicians fell within safe harbors under the Federal Anti-Kickback Statute and Stark. If indeed the allegations as to variable payments tied to referrals were true, that would have been a worthless defense.

Once again, the case demonstrates that simple, facial reliance on safe harbors under the Federal Anti-Kickback Statute and Stark do not guaranty safety for either hospitals or their physician employees and subcontractors.

Although this case was filed against the hospital (where the greater pile of money is in terms of the value of false claims), it’s highly unlikely that no one will pursue the physicians involved in the same event, whether under the Federal Anti-Kickback Statute or Stark.

The first is a criminal statue; violation is a felony leading to high fines, jail time, and debarment from further participation in federal health care programs. The second is a civil statute leading to civil monetary penalties and the same end to federal health care program participation.

The fact that the hospital paid the settlement without admitting that it committed a violation is further “proof” that even what might be an innocent error can lead to disastrous and financially ruinous consequences for both the facility and the healthcare providers involved.

Tread carefully in connection with any business relationship with any referral source or referral recipient. The devil truly is in the details.

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

Mark F. Weiss

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