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Adventist Health System to Pay $118.7 Million to Settle Whistleblower Case – Doctor’s “Self – Referral” at Heart of Allegations

Adventist Health System, based out of Florida, has reached a settlement with the federal government following allegations of the system offering “excessive” compensation for doctor’s referrals. In the settlement, Adventist Health Systems will have to pay a record setting $118.7 million to the federal government after three whistle-blowers from the company brought the case against the system in 2012.

Adventist Health System includes approximately 44 hospital campuses across 10 different states in the US. The whistle-blowers directly involved in the case had previously worked at a branch of the company, Adventist Park Ridge Health located in Hendersonville, N.C. The three individuals have been identified as risk manager Michael Payne, executive director of physician services Melissa Church, and a compliance officer for physician services by the name of Gloria Pryor. The case they brought against Adventist Health System alleges that Adventist paid doctors for referrals to their company in North Carolina, Florida, Tennessee, and Texas. These allegations are in direct violation of the Stark Law—a law that was instated under three separate provisions that govern physician’s ability to self-refer clients to a medical facility that they hold some type of financial investment in. This investment may include ownership of the facility or a structured compensation agreement with the facility in question. The case brought against Adventist further prompted claims to the government alleging that the system was also in violation of the False Claims Act, which is imposed on companies who “defraud” government programs.

Included in the case against Adventist Health System is the claim that the company paid for car leases for a BMW and a Mustang for a surgeon involved with one of their facilities. Another claim states that they paid an additional $710,000 in bonuses to a dermatologist who only worked out of the office three days a week. Adventist Health System is one of the largest systems of its kind in the nation. And the settlement reached between the company and the federal government over these claims is the largest ever reported for a settlement under the Stark law.

Adventist Health System issued a statement addressing the matter on Monday following the settlement agreement that came on September 21st. The statement read, in part, 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.” They went on to say that they conducted their own independent review and found that the reasons behind the claims brought against them had not negatively impacted quality, safety, or cost for patients under the Adventist Health System. The company went on to say that following the case brought against them by the three whistle-blowers from North Carolina, Adventist would be implementing a new centralized process that would establish a set compensation rate for physicians in an effort to prevent future Stark Law cases from coming against the company.

In addition to the announcement of the new processes being implemented by Adventist Health System, the company also stated that not every hospital under their system was directly involved in the whistle-blower’s accusations. They expressed regret for the actions of the few who broke the law by offering outlandish compensation to a select few physicians in exchange for referrals. Adventist expressed that this was the direct result of oversights within their company, and that they would be working toward improvements in the future. Adventist went on to say that they will be more closely monitoring their facilities in an effort to maintain the highest regulation standards possible.

Just last week, on September 15th, a similar settlement had been made between the U. S. Justice Department and the North Broward Hospital District. The Hospital District had agreed to pay a settlement for $69.5 million following accusations that they pad doctors more than market value, partly based off of referrals. This settlement had been the largest under the Stark Law until Monday’s settlement with Adventist. A week prior to the North Broward settlement with the U.S. Justice Department, an additional settlement of similar nature was settled between Columbus Regional Healthcare System. The Columbus (Ga.) Regional Healthcare System had agreed to pay a settlement for $35 million following accusations that they had also violated the Stark Law and the False Claims Act.

An attorney from the Washington D.C. based law firm Phillips and Cohen, Peter Chatfield, has said that these settlements prove that the Stark Law is being viewed and upheld seriously in recent months. His law firm Phillips and Cohen have represented whistle-blower cases in the past and are familiar with the process that comes along with these cases. Chatfield has said that the government is looking at these Stark Law violations earnestly and that he believes physicians receiving payment for referrals is inappropriate behavior and is being prosecuted accordingly.

 

Violations of the Stark Law are being brought to light more frequently under the False Claims Act, and those companies that are found to be in violation of these laws are being held accountable for their actions. As these settlements garner more attention, they have also highlighted to possible whistle-blowers that they will be entitled to some percentage of the money the government is able to recover during settlement. The percentage received by the whistle-blowers involved in the case against Adventist Health System was not made immediately available following the announcement of the settlement.

The settlement agreement covers the lawsuit presented by the three whistle-blowers from North Carolina as well as an additional lawsuit brought against the company by whistle-blowers from Florida. The settlement includes payments of $115 million to the federal government, $3.48 million to Florida, and $198,453 to North Carolina. The settlement also includes payments of $66,897 to Tennessee and $4,711 to Texas. Adventist Health System has facilities in each of these states in which physicians were compensated for referrals they were providing that violated the Stark Law.

While the Stark Law has faced some criticisms since it was first implemented, the regulations recently underwent changes that allowed for the Law to become more easily practiced. These changes have also opened the door for further settlements to take place to hold those in violation of the law accountable for their actions.

 

Additional quotes and information may be found at the following link for the original article: http://www.modernhealthcare.com/article/20150921/NEWS/150929974