DOJ suing health system in alleged kickback scheme
Three years after a pair of former hospital C-suite executives blew the whistle on their own institution, the U.S. Department of Justice has acted on the complaint.
DOJ filed suit against the organization, Erlanger Health System, July 26.
The department accuses Erlanger, which operates five hospitals in Tennessee and one in North Carolina, of submitting false Medicare claims.
The suit says Erlanger violated the Stark law—aka the “anti-kickback” statute—by accepting referrals from physicians who had “improper financial relationships” with Erlanger.
Some of the resulting services were not eligible for Medicare payment, and Erlanger compensated the treating physicians at rates “well above fair market value.”
U.S. Attorney Dena King of the Western District of North Carolina, where the suit was filed, says the department is “dedicated to enforcing the Stark Law and protecting patients and the Medicare program from financial relationships that undermine public trust and incentivize overbilling and waste of taxpayer dollars.”
The irregularities originally came to light in April 2021, when Erlanger’s then-CFO and chief compliance officer came forward and filed a federal lawsuit.
In this week’s suit, filed on behalf of the United States, the state of North Carolina, the state of Tennessee and the two whistleblowers, the Plaintiffs describe several incidents involving alleged violations. One example:
‘There was a correlation between the generous compensation packages that some physicians received from Erlanger and the value of their referrals. In 2018, for example, Erlanger paid orthopedic surgeon Freeman, $1,037,403 (primarily in clinical and medical director salaries and productivity bonus), but only collected approximately $750,000 for physician services billed by Dr. Freeman. Based on these numbers alone, Erlanger lost more than a quarter of a million dollars on Dr. Freeman’s practice in 2018. However, in 2018, Dr. Freeman referred 495 patient days at Erlanger hospitals for which Erlanger projected it would receive $5,904,809.’
If the suit is successful, the former C-suite whistleblowers may be eligible for a portion of the payout. In its announcement of the new action, DOJ notes that whistleblower provisions in the False Claims Act allow private parties to file suit on behalf of the United States for false claims and to receive a share of any recovery.
“The Act permits the United States to intervene and take over the lawsuit, as it has done here in part,” DOJ explains. “Those who violate the Act are subject to treble damages and applicable penalties.”
DOJ underscores that the claims asserted in the U.S.’s complaint are allegations only, and there has been no determination of liability to date.
Announcement here, suit here. Local coverage here and here.
Dave P. has worked in journalism, marketing and public relations for more than 30 years, frequently concentrating on hospitals, healthcare technology and Catholic communications. He has also specialized in fundraising communications, ghostwriting for CEOs of local, national and global charities, nonprofits and foundations.