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Adventist settlement latest in whistleblower cases against hospitals for Stark violations

Adventist Health System’s $118 million settlement this week is the latest and largest one involving violations of the physician referral law known as the Stark Act.

The settlement covered a qui tam lawsuit (a type of whistleblower case) Phillips & Cohen LLP filed in 2012 on behalf of three Adventist employees who became aware of an alleged system-wide kickback scheme involving unlawful financial arrangements between physicians and the non-profit hospital as well as alleged false billing claims submitted to Medicare and Medicaid.

The Adventist settlement was the second major settlement involving violations of the Stark Act in the past two weeks. North Broward Hospital District, which operates Broward Health hospitals in Florida, paid $69.5 million to settle allegations that it paid doctors for referrals.

The whistleblower lawsuit against Adventist alleged that Adventist initiated a corporate policy that directed its hospitals to purchase local physician practices and hire local physicians in order to increase the number of patient referrals to their hospitals. Adventist, which has locations in ten states, allegedly rewarded multiple doctors with excessive bonuses, benefits, personal perks and lax billing oversight in exchange for patient referrals to their facilities.

“The tactic was intended to increase the number of Medicare, Medicaid and other patients sent to Adventist hospitals for inpatient and outpatient treatment and boost the hospital’s revenues,” said Peter Chatfielda Phillips & Cohen attorney who represented the whistleblowers.

According to Special Agent in Charge Derrick L. Jackson of the U.S. Department of Health and Human Services Office of Inspector General in Atlanta, “Companies that financially reward physicians in exchange for patient referrals – as the government contended in this case – undermine the physicians’ impartial medical judgment at the expense of patients and taxpayers.”

The settlement also covers billing fraud allegations in the qui tam lawsuit involving “upcoding” (billing for more expensive treatment than needed), medically unnecessary services and “unbundling” multiple services to submit as separate claims to receive a larger reimbursement.

The lawsuit alleged violations of the Stark Act, which restricts financial relationships between doctors and hospitals, and the False Claims Act. The latter statute allows private citizens to bring a case against any entity defrauding the government and recover government funds. Whistleblowers are rewarded with 15 percent to 25 percent of the recovery when the government joins the case.

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