Adventist Settles Doc Kickback Charges
Adventist Health has agreed to pay $14.1 million to state and federal agencies to settle allegations that one of its Southern California hospitals paid kickbacks to two medical groups.
The allegations surfaced as part of a recently unsealed whistleblower lawsuit filed by two osteopathic doctors in 2008 in U.S. District Court in Sacramento. Both the U.S. Department of Justice and the California Department of Health Care Services joined the lawsuit last month, likely pressuring a settlement on Adventist's part.
The suit contended that White Memorial Medical Center in downtown Los Angeles had violated the so-called Stark Law, which prohibits hospitals from seeking reimbursement from Medicare and Medicaid from claims generated by physicians with whom they have a financial relationship, as well as the federal anti-kickback statute that bars payments in exchange for making patient referrals. It also alleged that Adventist broke similar California laws.
The suit was filed by Hector Luque, who practices in East Los Angeles, and Alejandro Gonzalez, who practices in Whittier, according to Michael Hirst, one of the attorneys involved in the case.
“They blew the whistle because they believed that the conduct alleged in the complaint was wrong and demonstrated a systematic disregardfor federal and state laws designed to ensure that healthcare decisions are based on sound medical judgment rather than personal financial gain,” Hirst said in an email.
According to the suit, White Memorial had engaged in inappropriate financial relationships with two medical groups, Family Care Specialists and White Memorial Medical Group.
Family Care had been paid above market value for providing the hospital's family practice residency program based at the hospital.
“There are many ways in which hospitals can try to mask payments to physicians that are designed to induce refer of patients. One of those ways is by overpaying for teaching services,” Hirst said.
Conversely, White Memorial Medical Group had been charged below market value for the transfer of the assets of an Adventist medical foundation into its control.
“The government found out about what Adventist was doing only because two doctors challenged the system by filing a whistleblower lawsuit,” said Claire M. Sylvia, a San Francisco attorney who represented one of the osteopaths, in a statement. “Doctors must make treatment decisions based on the best interests of their patients rather than on personal financial interests, which is why hospitals can't pay doctors for patient referrals.”
Adventist will pay $11.5 million of the settlement to the Justice Department, and $2.6 million to the state of California.
Adventist, a not-for-profit that operates 13 hospitals in California, does not admit to any wrongdoing as part of the settlement, according to Catherine Swann, a U.S. Assistant Attorney in Sacramento.
White Memorial has also agreed to enter a corporate integrity program overseen by the U.S. Department of Health and Human Services' Office of the Inspector General.
The five-year agreement requires White to appoint a compliance manager that reports directly to its chief executive officer, create a compliance board of senior hospital management and notify HHS of any deals it enters regarding leases, orders or transactions in exchange for services, according to Swann. An Adventist spokesperson said White is already in compliance with many terms of the agreement.
In a statement, Adventist said it had “cooperated fully with the investigation,” and that the matter was settled “to avoid protracted litigation which will take our focus away from serving our community and potentially resulting in an even greater outlay of resources.“
As part of the federal False Claims Act, Luque and Gonzalez will split 20% of the settlement, or just under $2.84 million, according to Hirst.
