Several Western Hospitals and Health Systems Settle Anti-Kickback, Stark and FCA Allegations With DOJ in 2013
Several hospitals and health systems have recently settled Anti-Kickback Statute, Stark Law and False Claims Act allegations with the Department of Justice
(DOJ). The settlements described below arose from compliance issues discovered by the hospitals and self-reported to the DOJ. Though the hospitals did
ultimately pay significant amounts to the DOJ to resolve these allegations, by pursuing self-disclosure it’s likely that they greatly limited their
On Dec. 31, 2013, the DOJ announced that St. James Healthcare, a Montana hospital, and its parent health system, Sisters of Charity of Leavenworth Health
settled allegations of Anti-Kickback Statute, Stark Law and Federal
False Claims Act violations for $3.85 million. The DOJ claimed that St. James and Sisters of Charity violated these laws by improperly providing financial
incentives to physicians and physician groups in a joint venture with St. James to operate a medical office building. The settlement with the DOJ resolved
the allegations only and; there was no determination or acknowledgment of liability.
The financial incentives at issue stemmed from a 2005 partnership agreement that allegedly included a payment by St. James that increased the share value
for the physicians and physician groups in the joint venture and resulted in lease rates below fair market value for the physicians renting space in the
medical office building. In addition, the government alleged that the parties entered into additional arrangements related to the joint venture, such as
shared facilities and other maintenance services, and that these relationships were below fair market value.
In 2009, St. James self-reported the relationship with the physicians and physician groups to the U.S. Attorney’s Office after an internal compliance
review discovered the discrepancies in the partnership agreement. The St. James settlement is not unique as several other hospitals and health systems have
likewise settled False Claims Act allegations in the past year. In April 2013, the DOJ announced that Intermountain Health Care, the largest health system
in Utah, paid the U.S. government $25.5 million to settle Stark Law and False Claims Act allegations. Less than a month following this settlement, St.
Vincent Healthcare in Billings, Mont., and Holy Rosary Healthcare in Miles City, Mont., settled with the DOJ for $3.95 million to resolve allegations of
noncompliance with physician compensation requirements under the Stark Law. According to Assistant Attorney General for the Justice Department’s Civil
Division Stuart F. Delery, “Improper financial arrangements between hospitals and physicians not only undermine the integrity of the decisions that doctors
make, they raise the cost of health care for all of us.” Since January 2009, the DOJ has recovered $12.2 billion through False Claims Act cases that
involve fraud against federal health care programs.
The St. James, Intermountain and St. Vincent/Holy Rosary settlements all originated as internal investigations and review processes that led to
self-disclosure to the government. While the settlement amounts paid by these institutions are significant, it’s likely that the institutions
greatly reduced their potential damages by pursuing self-disclosure. The experiences of these institutions is a constant reminder to other providers to
remain vigilant about compliance by pursuing internal investigations and audits of physician relationships and taking appropriate action when issues are
If you have questions regarding compliance with the Anti-Kickback Statute or the Stark Law, or structuring relationships with physicians and physician
groups, please do not hesitate to contact one of the authors.