HOSPITAL SYSTEM TO PAY $85 MILLION TO SETTLE ALLEGED IMPROPER PHYSICIAN REFERRAL CASE

FROM:  U.S. JUSTICE DEPARTMENT 
Tuesday, March 11, 2014
Florida Hospital System Agrees to Pay the Government $85 Million to Settle Allegations of Improper Financial Relationships with Referring Physicians

Halifax Hospital Medical Center and Halifax Staffing Inc. (Halifax), a hospital system based in the Daytona Beach, Fla., area, have agreed to pay $85 million to resolve allegations that they violated the False Claims Act by submitting claims to the Medicare program that violated the Physician Self-Referral Law, commonly known as the Stark Law, the Justice Department announced today.  

The Stark Law forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital.  In this case, the government alleged that Halifax knowingly violated the Stark Law by executing contracts with six medical oncologists that provided an incentive bonus that improperly included the value of prescription drugs and tests that the oncologists ordered and Halifax billed to Medicare.  The government also alleged that Halifax knowingly violated the Stark Law by paying three neurosurgeons more than the fair market value of their work.

“Financial arrangements that compensate physicians for referrals encourage physicians to make decisions based on financial gain rather than patient needs,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “The Department of Justice is committed to preventing illegal financial relationships that undermine the integrity of our public health programs.”

In a Nov. 13, 2013, ruling, the U.S. District Court for the Middle District of Florida ruled that Halifax’s contracts with its medical oncologists violated the Stark Law.  The case was set for trial on March 3, 2014, on the government’s remaining claims against Halifax when the parties reached this settlement.

“This settlement illustrates our firm commitment to pursue health care fraud," said U.S. Attorney for the Middle District of Florida A. Lee Bentley III.  “Medical service providers should be motivated, first and foremost, by what is best for their patients, not their pocketbooks.  Where necessary, we will continue to investigate and pursue these violations in our district.”

As part of the settlement announced today, Halifax also has agreed to enter into a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG), which obligates Halifax to undertake substantial internal compliance reforms and to submit its federal health care program claims to independent review for the next five years.

“Patients deserve to know that recommendations are based on sound medical practice, not illegal financial relationships between providers,” said Inspector General for the U.S. Department of Health and Human Services Daniel R. Levinson.  “Halifax now also is required to hire a legal reviewer to monitor provider arrangements and an additional compliance expert to assist the board in fulfilling its oversight obligations.  Both of these independent reviewers will submit regular reports to my agency.”

The settlement announced today stems from a whistleblower complaint filed by an employee of Halifax Hospital, Elin Baklid-Kunz, pursuant to the qui tam provisions of the False Claims Act, which permit private persons to bring a lawsuit on behalf of the government and to share in the proceeds of the suit.  The Act also permits the government to intervene and take over the lawsuit, as it did in this case as to some of Baklid-Kunz’s allegations.  Baklid-Kunz will receive $20.8 million of the settlement.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $19 billion through False Claims Act cases, with more than $13.4 billion of that amount recovered in cases involving fraud against federal health care programs.

The investigation and litigation was conducted by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Middle District of Florida and HHS-OIG.  The claims settled by this agreement are allegations only, and there has been no determination of liability, except as determined by the court’s Nov. 13, 2013, ruling.