In The News

Lexington Medical Center to Pay $17 Million to Resolve Claims that it Violated both the False Claims Act and the Stark Law

Often when the government finds alleged violations of the False Claims Act, it also detects violations of other laws as well.  This was the case when late last month the Department of Justice announced that Lexington Medical Center of West Columbia, South Carolina had agreed to pay $17 million to resolve allegations that it violated The Stark Law and the False Claims Act in its financial arrangements with dozens of physicians.  The Stark Law’s intent is to ensure that physician referrals are based solely on medical need and not on arrangements with those physicians.  (The law is also known as the Physician Self-Referral Law.)  It forbids hospitals from billing Medicare for most services that are referred by doctors who have a financial relationship with the hospital unless there are specific exceptions to those arrangements.  The rare exceptions are in cases where the financial arrangement does not exceed fair market value.  Also, arrangement with doctors who are not hospital employees must be set out in writing so as to satisfy a number of requirements.  This is to avoid the establishment of improper financial arrangements.

“This case demonstrates the United States’ commitment to ensuring that doctors who refer Medicare beneficiaries to hospitals for procedures, tests and other health services do so only because they believe the service is in the patient’s best interest, and not because the physician stands to gain financially from the referral,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  Specifically, the government alleged that Lexington Medical Center’s purchase agreements entered into with 28 physicians violated the Stark Law because it took into account the volume or value of physician referrals that were not commercially reasonable and that did not fall under the fair market value exception.

As part of the settlement, Lexington Medical center will have to enter into a Corporate Integrity Agreement with the Department of Health and Human Services-Office of the Inspector General (HHS-OIG).  This agreement will require that Lexington implements measures designed to avoid or detect the kinds of conduct that are the basis of this settlement.  The settlement came about from a lawsuit by Dr. David Hammett – a former physician employed by Lexington Medical Center – filed in federal court in Columbia, South Carolina.  The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act.  This provision permits private parties to sue on behalf of the government in cases of involving fraud and it allows citizens to share in a portion of any subsequent recovery.  Dr. Hammett’s recovery will amount to approximately $4.5 million.

The settlement comes as part of an initiative begun back in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The initiative spawned a unit known as HEAT (Health Care Fraud Prevention and Enforcement Action Team).  Since January 2009 the Justice Department through HEAT has recovered more than $30 billion through False Claims Act Cases. If you know of fraud that has been committed against the government or its agencies you are encouraged to report it and to consider researching qui tam law firms so that you can receive counsel.