The federal government has joined a civil Medicare fraud lawsuit against a Michigan hospital accused by a whistleblower of paying illegal kickbacks to a group of physicians in exchange for patient referrals.
The whistleblower uncovered the alleged kickback scheme after the physicians complained that a medical office building they owned and in which the hospital leased space was overassessed for property taxes. The overassessment resulted from the inflated rent the hospital paid, which was a disguised payment for patient referrals, the suit alleges.
The hospital, 476-bed McLaren Regional Medical Center in Flint, and the six-member physician group, Family Orthopedic Associates, filed a motion in U.S. District Court in Detroit last week seeking a dismissal.
"McLaren vehemently disagrees with this allegation of overpayment and, if necessary, is prepared to defend our position through the legal system," said Laurie Prochazka, a McLaren spokeswoman.
"We think their motion to dismiss is baseless," said Michael Riordan, the assistant U.S. attorney in Detroit who represents the government in the case.
No trial date has been set.
Two Flint attorneys, Peter Goodstein and Charles Grossman, filed the original 29-page complaint against the hospital and the physicians in June 1997.
Goodstein represents Flint Township, which attempted in 1995 to assess property taxes against the physicians' medical office building based on the $17-per-square-foot rate of rent the hospitals paid to the physicians.
The physicians appealed the assessment to the Michigan Tax Tribunal, arguing that the market value of the space was $12 per square foot.
The physicians won their tax appeal but may have exposed the alleged kickback scheme in the process.
"The (doctors) indicated that they had a financial relationship that was over market value. That was the gist of their argument," Goodstein said. "The tax court bought it, and they won. It's a funny thing. I don't know what they were thinking."
The circumstances that led to discovery of the alleged kickback scheme are reminiscent of those that led to a kickback investigation and ultimate settlement with St. Joseph's Medical Center in South Bend, Ind., in 1998. In that case, the physician involved disclosed the kickback scheme in an unrelated lawsuit he filed against the hospital for suspending his privileges for alleged quality problems (May 11, 1998, p. 22).
McLaren rented space in the physicians' building for a physical and occupational therapy clinic. The suit says the inflated rent was to induce physicians to refer patients who needed those services to the clinic.
Federal law bars any form of remuneration to induce the referral of Medicare or Medicaid patients.
"McLaren entered into a proper, negotiated lease for this space and is very confident that the lease rate for the space is fair market value, based upon comparable rates paid in the market," McLaren's Prochazka said.