Record Stark Law Settlement Under False Claims Act

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Two hospital systems have recently settled allegations by whistleblowers under the False Claims Act that they improperly rewarded physician referrals under the Stark Law, with one believed to be the largest settlement of its kind. Broward Health will pay $69.5 million in a settlement announced last week and Adventist Health will pay $118.7 million in an unrelated case with multiple whistleblowers.

The Stark Law prevents hospitals from paying doctors for referrals of Medicare patients. By restricting the financial incentives for treatment of patients insured by government health care programs, the law helps fight unnecessary overbilling.

There have been a number of large settlements in the past year of similar cases involving its corollary, the Anti-Kickback Statute (“AKS”). The AKS applies more broadly, as it covers the payment of referrals to individuals other than doctors. A few of these cases have contained allegations of both kickbacks to physicians and others, implicating both laws.

There is also an ongoing case against Tuomey Healthcare System involving the Stark Law which received a verdict against the hospital of $237 million. Over the summer, Tuomey lost their appeal to the Fourth Circuit. A news article at the time indicated that the hospital was considering its legal options and involved in settlement discussions with the U.S. Government.

Broward Health was accused of paying cardiologists more than $1 million using medical director jobs which were largely a sham designed to boost their compensation

The allegations against Adventist weren’t immediately clear from the press release. Lat year, Adventist indicated it self-reported violations of the Stark Law to the Department of Justice.

Both the Stark Law and the AKS place certain permitted conduct within a safe harbor or exclusion to only target the types of conduct that Congress and regulators have found objectionable. If the conduct violates one or both laws, they also implicate the False Claims Act, which will reward whistleblowers with 15 to 30 percent of the recovery for reporting information to the U.S. Government.

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