Posted on August 30, 2009 by Robert Cochran

Hospital Pays $4.5 Million to Resolve False Claims Allegations

On August 25, 2009, the Department of Justice announced Covenant Medical Center in Waterloo, Iowa agreed to pay the United States $4.5 million to resolve allegations that it violated the False Claims Act. The settlement resolves allegations that Covenant submitted false claims to Medicare by having financial relationships with five physicians that violated the Stark Law. The government alleged that Covenant violated the Stark Law by paying commercially unreasonable compensation, far above market value, to five employed physicians. According to the government, these physicians were among the highest paid hospital-employed physicians not just in Iowa, but in the entire United States.

Covenant issued a press release denying any wrongdoing or illegal conduct. Covenant maintained the physician compensation was consistent with the approved compensation plan, was based on work personally performed by the physicians, and reflected their exceptionally high level or productivity. Covenant said it made a business decision to settle to avoid the uncertainty of litigation, disruption, and high expense associated with protracted litigation with the government. 

 

An article in the Des Moines Register on May 26, 2005 provides some information about the compensation. The paper reported that Covenant paid one orthopedic surgeon more than $2.1 million and a second orthopedic surgeon more than $1 million. A gastroenterologist was paid nearly $2.1 million. These figures were for the budget year ending in June 2003. 

 

DOJ's press release is here www.justice.gov/opa/pr/2009/August/09-civ-849.html

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Posted on July 23, 2008 by Catherine Dunlay

Stark Law Settlement - Physician Employment

The Department of Justice (DOJ) announced on April 24, 2008 that the parent of Memorial Health University Medical Center agreed to pay over $5 million to settle allegations that it violated the Stark Law in connection with its payment of compensation to physicians employed by its affiliate, Georgia Eye Institute. Memorial also entered into a Certification of Compliance Agreement with the Department of Health and Human Services Office of Inspector General. Memorial denied all allegations, and the settlement agreement specifies that it is not an admission of wrongdoing.

The qui tam complaint filed by Dr. Ryan Boland alleged both overpayment for acquisition of the physician practices and excessive compensation, but the DOJ press release only references the compensation issues. According to the initial complaint, some ophthalmologists were paid as much as $500,000 in compensation, and the relator believed there were emails indicating teaching stipend/indigent care payments were actually disguised payments for surgical referrals. The complaint alleges that the hospital formed a nonprofit ophthalmology practice and after transitioning compensation within the practice to a productivity model, provided the practice with teaching/indigent support payments that were funneled to a small number of the doctors in order to retain them. These doctors allegedly received compensation that was in excess of fair market value and that was not commercially reasonable because it did not take into account which doctors performed the teaching and indigent care services.

This settlement should serve as a reminder to hospitals pursuing physician employment strategies to carefully review their compensation methodologies, including the manner in which compensation is allocated among individual physicians in an affiliated practice. To comply with the Stark Law, employed physicians’ compensation must be consistent with fair market value and may not take into account the volume or value of referrals made by the physician. The arrangement with the employed physicians also must be commercially reasonable.

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