California hospital pays nearly $3.3M over potential Stark violations

A California hospital has agreed to pay $3.28 million to settle allegations that nearly 100 of its payment arrangements with doctors and physicians groups broke federal law.

Tri-City Medical Center in Oceanside, Calif., self-reported the potential violations of the Stark law and False Claims Act in 2011.

The Stark law prohibits doctors from referring Medicare patients to hospitals, labs and other doctors that the physicians have financial relationships with unless they fall under certain exceptions. Those exceptions require that the financial arrangements between hospitals and doctors be commercially reasonable and not take into account the number of a doctor's referrals to the hospital.

Five arrangements with the hospital's former chief of staff may not have been commercially reasonable or for fair market value. Another 92 financial arrangements with community-based physicians and practice groups allegedly included technical violations. In those cases, the written agreements were allegedly expired, missing signatures or couldn't be found, among other things.

The Tri-City executives who oversaw the contracts in 2009 are no longer affiliated with the hospital, and all of its current contracts are in compliance with the law, according to a hospital statement.

“It is unfortunate to have inherited this longstanding legal issue, but we are pleased to have brought it to a successful conclusion,” CEO Tim Moran said in the statement.

In recent months, a number of hospitals systems have entered into large settlements with the government over alleged violations of the Stark law and False Claims Act.

Adventist Health System agreed in September to pay the government $118.7 million to settle allegations it offered doctors excessive compensation for referrals. A week before that settlement, North Broward Hospital District agreed to pay the government $69.5 million to settle allegations it paid doctors more than fair market value based, in part, on their referrals. In October, Tuomey Healthcare System in Sumter, S.C., agreed to settle with the government for $72.4 million over similar allegations.

Those three cases, unlike the Tri-City case, arose from whistle-blower lawsuits.

Lisa Schencker

Lisa Schencker covers legal issues and enforcement agencies. Before joining Modern Healthcare in 2014, she was an education reporter for the Salt Lake Tribune and before that wrote for the Bakersfield Californian and the Scranton (Pa.) Times-Tribune. She has bachelor’s and master’s degrees in journalism from the University of Illinois at Urbana-Champaign.

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