Ky. hospital to pay nearly $41M to settle kickback, false claims charges

King's Daughters Medical Center has finalized a settlement with the U.S. Justice Department that resolves allegations that it performed unnecessary cardiac procedures and had inappropriate financial relationships with referring physicians.

The Ashland, Ky.-based hospital, the largest in the state, had disclosed in its 2013 annual report that it was in negotiations for the $40.9 million settlement.

“The medical center's leadership team made the difficult decision to settle the investigation rather than continue to drain valuable resources on government allegations related to old cases,” the hospital said in a statement. “The settlement is not an admission of wrongdoing on behalf of the medical center.”

The statement also pointed to a number of programs that have recognized King's Daughters' cardiac program for meeting or exceeding national standards.

The Justice Department alleged that between 2006 and 2010, King's Daughters billed Medicare and Medicaid for numerous unnecessary coronary stents and diagnostic catheterizations. Moreover, it claimed that physicians falsified medical records to justify the unnecessary procedures.

The settlement also covers allegations that King's Daughters violated the Stark law by paying certain cardiologists unreasonably high salaries.

As part of the deal, King's Daughters will enter into a five-year corporate integrity agreement with HHS' inspector general's office that requires it to overhaul its internal compliance program and commit to third-party review of claims it submits to federal healthcare programs.

The hospital is one of a number of providers to come under scrutiny for alleged overuse of profitable stent surgeries. The government has taken the position that a coronary artery must be at least 70% blocked to justify a stent.

Negative publicity from the investigation was one of the factors that have depressed patient volume at the medical center. In a call with bondholders this year, the hospital said it has seen a 48.3% decrease in cardiac catheterizations, which was also due to the loss of two high-volume cardiologists.

King's Daughters is in the midst of a wide-ranging turnaround plan to stem its recent financial losses.

Follow Beth Kutscher on Twitter: @MHbkutscher