Healthcare Business News

Infirmary Health to pay $25 million to settle Stark case

By Joe Carlson
Posted: July 21, 2014 - 6:15 pm ET

One of Alabama's largest health systems is paying $25 million to resolve a federal whistle-blower lawsuit that claimed its clinics routinely overpaid doctors to refer their radiology patients to hospitals, despite clear bans against paying for such referrals.

Infirmary Health System, Mobile, Ala., settled allegations Monday that since 2008, two of its clinics paid radiologists bonuses that were calculated based on how many patients were referred for services.

The federal Stark law makes it illegal to pay doctors directly for Medicare referrals because those referrals are viewed as likely to fuel medical overuse and funnel patients to the most-expensive tests and procedures.

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Infirmary, which has four hospitals and 30 clinics, argued in court filings that the bonuses at issue were based on a formula that did not directly correlate to the number of patients referred. The system does not admit wrongdoing in the $24.5 million settlement agreement announced Monday.

“Today's settlement represents a single but significant step toward achieving integrity in the administration of public health programs in the region,” said Kenyan Brown, U.S. attorney for the southern district of Alabama. “Physicians, physician groups and other medical entities operating illegally within public health programs will be held accountable.”

The settlement involved alleged violations of three laws. Both the Stark law and Medicare's anti-kickback statute prohibit payments for referrals, while the False Claims Act gives private whistle-blowers the power to file lawsuits on behalf of the government to claw back tainted Medicare and Medicaid money and collect a share of the recovery.

The allegations against Infirmary first surfaced in a whistle-blower complaint filed by former Infirmary physician Dr. Christian Heesch.

Officials with Infirmary declined to issue an immediate comment about the settlement. When the case was unsealed last year, Infirmary Health System CEO Mark Nix noted that the system's clinics and hospitals denied the allegations and would fight them vigorously.

The settlement agreement does not make any mention of patient harm. Heesch's complaint alleged the bonus structure encouraged the overuse of a common type of imaging in cardiology called the nuclear stress test, which exposes patients to small doses of radiation.

However, when the Justice Department intervened in the case as a plaintiff that August, the complaint focused only on the incentives paid to physicians. The complaint noted that some non-cardiologists started ordering nuclear stress tests after joining the Infirmary staff, but it stopped short of accusing anyone of exposing patients to harm.

Heesch, as an interventional cardiologist at Infirmary from 2004 to 2011, will receive $4.4 million from the settlement for his role in bringing the allegations to light. A related wrongful-termination lawsuit he filed after being fired from Infirmary was dismissed by a judge in April.

Follow Joe Carlson on Twitter: @_JoeCarlson

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