Adventist Health System will pay the government $118.7 million to settle allegations it offered doctors excessive compensation for referrals—a settlement amount that nearly doubles a record set just last week.
In 2012, three whistle-blowers brought the case against the Florida-based system, which includes 44 hospital campuses in 10 states. They alleged that Adventist paid doctors for referrals in Florida, North Carolina, Tennessee and Texas in violation of the Stark law, which in turn, led to tainted claims to the government in violation of the False Claims Act.
The whistle-blowers said the system also paid for the leases of a BMW and Mustang for a surgeon and paid $710,000 in bonuses and salaries to a dermatologist who worked three days a week.
Adventist noted in a statement Monday that the settlement "fully resolves issues AHS voluntarily disclosed to the United States government in early 2013 involving its implementation of certain physician employment compensation models and highly technical physician billing and coding issues."
Adventist said in the statement its own review did not identify any negative impacts on quality, safety or cost of patient care. Since that self disclosure, Adventist noted that it's implemented a centralized process to set physician compensation, among other things.
"Adventist Health System regrets these oversights, and while some of its hospitals had no violations, the organization has improved monitoring and business practices system-wide as a result of lessons learned from this experience so that it can continue to uphold the highest standards of compliance with regulations," according to the statement.
Adventist is one of the largest systems in the nation, with an operating revenue of nearly $8.4 billion in 2014, according to the Modern Healthcare systems financial database.
The settlement is the largest ever reached without litigation under the Stark law, said Peter Chatfield, a partner with Phillips and Cohen in Washington, D.C., a law firm which represented the whistle-blowers in the case.
It's an amount that shatters the previous record set a week ago.
On Sept. 15, the U.S. Justice Department announced that the North Broward Hospital District would pay $69.5 million to settle allegations that it paid doctors far more than fair market value based, in part, on their referrals.
A week before, Columbus (Ga.) Regional Healthcare System agreed to pay the government $35 million to settle allegations it violated the Stark law and False Claims Act.
Neither North Broward nor Columbus Regional admitted to any liability as part of those settlements.
“I think what this is showing is that Stark is being looked at very seriously by the government, and it's not just on a fair market value basis but also on the basis that if physicians are being paid for referrals, whether outpatient or inpatient, and that's not appropriate,” Chatfield said.
Stark cases are increasingly being brought to court under the False Claims Act, which carries triple damages. False Claims Act cases usually settle because of those potentially huge damages.
Chatfield said the number of Stark cases being brought under the False Claims Act may be increasing as whistle-blowers become more aware of such settlements, as they are entitled to a percentage of whatever money the government is able to recover.
The amount the whistle-blowers will get from this case has not yet been determined, Chatfield said.
The whistle-blowers in this case all formerly worked at Adventist's Park Ridge Health in Hendersonville, N.C., and included Michael Payne, a risk manager; Melissa Church, executive director of physician services; and Gloria Pryor, a compliance officer for physician offices.
The federal government had also joined the case, which was sealed until now.
As part of the settlement agreement, which covers this lawsuit and a separate but similar whistle-blower suit filed in 2013, Adventist will pay $115 million to the federal government, $3.48 million to Florida, $198,453 to North Carolina, $66,897 to Tennessee and $4,711 to Texas.
Much of the settlement amount is based on allegations involving Florida Hospital Medical Group, an Adventist-owned physician practice in Florida. The whistle-blowers became aware of alleged violations while working at Park Ridge in North Carolina. As part of the lawsuit, they alleged that Adventist, as corporate policy, told its hospitals to purchase physician practices and group practices or employ nearby physicians so it could control all patient referrals in those areas.
Adventist also settled a number of other allegations, including that it:
- Upcoded Medicare claims for patients in nursing and assisted-living facilities
- Submitted claims for services by doctors without proper credentials to work at the hospitals where they were filling in for regular doctors
- Unbundled services and submitted them as separate claims to get larger reimbursements from the government
- Submitted claims for services that weren't documented in patients' medical records
The Stark law has been widely criticized for its complexity. But earlier this year, the CMS proposed regulatory changes that experts say seem aimed at easing the law's technical burdens and reducing the numbers of self-disclosures coming to the CMS under the law.
This year, a federal appeals court upheld a $237 million verdict against Tuomey Healthcare System in Sumter, S.C., in a Stark case that alleged violations of the False Claims Act, but that case involved litigation.