In The News

California Hospital to Pay More Than $3.2 Million to Settle Allegations That It Violated the Physician Self-Referral Law

Last month, the Justice Department announced that Tri-City Medical Center (TCMC) agreed to pay more than 3 million dollars to resolve allegations that it violated the Stark Law and the False Claims Act. The government contended that TCMC violated Medicare’s prohibition on maintaining financial arrangements between hospitals and referring physicians. The Stark Law (42 U.S. Code § 1395nn) governs physician self-referral for Medicare and Medicaid patients with several enumerated exceptions.


“The settlement of this matter reflects not only our commitment to protect the integrity of the healthcare system through enforcement of the Stark Law, but also our willingness to work with providers who disclose their own misconduct,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. The announced settlement resolved allegations that Tri-City Medical Center maintained 97 financial arrangements with physicians and physician groups in violation of the Stark Law. TCMC identified five arrangements with its former chief of staff from 2008 until 2011 that, in the aggregate, appeared not to be commercially reasonable or for fair market value (two exceptions to the Stark Law). Moreover, TCMC identified 92 financial arrangements with community-based physicians and practice groups from 2009 until 2010 that violated the Stark Law because the written agreements were expired, missing signatures or could not be located.


“Together with our law enforcement partners, our agency’s investigators and attorneys will continue to work with health care providers who use the self-disclosure protocol to resolve their billing misconduct,” said Special Agent in Charge Chris Schrank of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Los Angeles region.” This settlement illustrates the government’s emphasis on combating health care fraud and prosecuting Medicare fraud cases which began as an initiative in 2009. Back then, the government established the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative. The goal of said initiative is to reduce and prevent Medicare and Medicaid financial fraud. Since January 2009, the Justice Department has recovered a total of more than $27.1 billion through False Claims Act cases, with more than $17.1 billion of that amount recovered in cases involving fraud against federal health care programs.


Parties that are reporting Medicare fraud and have evidence of such fraud against federal programs or contracts may file a qui tam lawsuit. They are also entitled to protection under the Whistleblower portions of the False Claims Act and may ultimately be able entitled to a portion of any settlement reached in these cases. This matter was handled by the U.S. Attorney’s Office of the Southern District of California, the Civil Division’s Commercial Litigation Branch and HHS-OIG.