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Healthcare Provider Specializing in Acute Car Agrees to pay $13 Million to Settle False Kickback and Stark Law Allegations

Oftentimes healthcare entities that are alleged to have defrauded the federal government are subject to equivalent state laws. This was certainly the case earlier this month when the Justice Department announced that Pennsylvania-based long-care and rehab provider Post Acute Medical, LLC and certain of its entities (collectively, “PAM”) have agreed to pay the US and the states of Texas and Louisiana a total of $13,168,000 to settle claims that they violated the False Claims Act by knowingly submitting claims to Medicare and Medicaid that resulted in violations of the Anti-Kickback Statute and the Physician Self-Referral Law (also known as the Stark Law). The Anti-Kickback Statute makes it a criminal act for healthcare provides to exchange (or offer to exchange), anything of value, in an effort to induce (or reward) the referral of federal health care program business. The Physician Self‑Referral Law, commonly known as the Stark Law, prohibits physicians from referring patients to a medical facility for which said physician has a financial interest, bet it ownership, investment, or structured compensation agreement. Both The Anti-Kickback Statute and the Physician Self-Referral Law were designed to ensure that the judgment of healthcare providers be based on patient need and not on any financial incentive.

Since it began more than a decade ago, PAM entered into physician-services contracts on behalf of its hospitals. It is the government’s contention that this was done in order to induce physicians to refer its patients to PAM’s facilities. This, the government alleges, violated the Anti-Kickback Statute by entering into “reciprocal referral relationship” with unaffiliated healthcare providers. “PAM’s alleged kickbacks and improper physician relationships threatened the impartiality of medical decision-making and the financial integrity of Medicare and Medicaid,” said Special Agent in Charge C.J. Porter for the U.S. Department of Health and Human Services Office of Inspector General. “Our agency will continue to investigate companies who step over the line to maximize their profits at the expense of federal health care programs.”

Under the terms of the settlement announced earlier this month, PAM will pay $13,031,502 to the United States, $114,016 to Texas, and $22,482 to Louisiana. (PAM’s actions are also alleged to have violated Texas and Louisiana’s false claims statutes.) A lawsuit filed by Douglas Johnson lead to this settlement. Mr. Johnson filed his whistleblower Medicare lawsuit under the qui tam provisions of the False Claims Act. This act allows private parties to sue for false claims on behalf of the government and to share in any recovery. Plaintiffs can then, if they choose, retain whistleblower lawyers to help them in their efforts. Mr. Johnson is slated to receive $2,345,670 as his share of the federal government’s recovery.

Finally, PAM has been made to enter into a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General. This CIA compels PAM to hire an Independent Review Organization to oversee its activities.