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Adventist Health System Settles False Claims Act Allegations for $115 Million

Pill-Capsule-150x150Adventist Health System has agreed to pay the government $115 million in order to settle allegations that it violated the False Claims Act and the Stark Law. The suit alleged that fraud was committed against the government when Adventist paid its doctors excessive sums in compensation for patient referrals. It was also alleged that fraud was committed through the miscoding of Medicaid and Medicare claims, which resulted in higher reimbursement rates than were deserved. This settlement is the highest amount ever paid in a case of fraudulent patient referrals and it nearly doubles the previous record. That past record was set just last week when North Broward Hospital District agreed to pay $69.5 million to settle allegations of kickback payments for patient referrals.  

Adventist is a a non-profit health care organization that operates facilities in ten states across the southern United States. The organization is run by the Seventh-Day Adventist Church, it is the largest Protestant non-profit in the country, supporting 45 hospitals with over 8,000 licensed beds. Its flagship hospital is the Florida Hospital, and is considered one of the best hospitals in the country. The alleged fraud occurred within the Florida, North Carolina, Tennessee, and Texas hospital networks.

Three separate whistleblowers brought this violation to the government’s attention. Michael Payne, Melissa Church, and Gloria Pryor all worked at Adventist corporate offices. Through their work they discovered the fraudulent kickbacks. They alleged that the hospitals rendered services to patients, and that these patients were referred to the hospitals by employed physicians who received bonuses linked to the value generated from the referred patients. One whistleblower alleged that Adventist paid for the leases of a Mustang and BMW for one of its surgeons for the patient referrals he had made. In another allegation, Adventist had paid a total of $710,000 through bonuses and salaries to a dermatologist that worked only three days a week.

Violations of Stark Law’s kickback provisions have become common in the medical industry. The law prohibits a physician who has a financial relationship with the medical organization from making referrals to that medical organization in exchange for compensation. The most identifiable violation of this law would be when a doctor owns both a general practice and a surgical practice, the doctor would violate the law by telling all patients at the general practice to have their surgery performed at the surgical practice he also owns. Anytime a doctor refers a patient to a specific hospital he is making a referral, and this violates the law when that doctor is compensated by the hospital for that referral. Compensation to the doctor can be provided in a variety of ways, often complex compensation structures inadvertently provide the doctor with additional compensation for the volume of clients treated, and this violates the law. Most of the federal circuits use the “one purpose test”, which declares that a payment is a kickback if just one purpose of the payment was to induce future referrals. This law provides three important services; it prevents doctors from ordering unnecessary medical services, it helps to decrease the charges for medical services that are necessary, and it prevents doctors from influencing what medical facilities a patient will choose. The Stark Law creates no right of action, so in order to bring a Stark claim, lawyers must tie the Stark violation to a False Claims Act case.

False Claims Act cases are increasingly being brought forward by the government after Stark violations. Recent record breaking settlements highlight the government’s commitment to battling health care fraud. Since January of 2009 the Justice Department has recovered more than $25 billion through False Claims Act enforcement. Under the False Claims Act, whistleblowers receive up to 30% of the final settlement or damages. In the case at hand, whistleblowers could be entitled to as much as $34.5 million. It is only through the efforts of perceptive whistleblowers that the government has been able to recover taxpayer’s money.