MedStar Health Pays $35M to Settle Kickback Claims

Payments were allegedly paid under the guise of professional service agreements.

MedStar Health, a health system in Maryland and Washington, D.C., and two of its hospitals have settled allegations that they violated the False Claims Act by engaging in conduct that violated the Anti-Kickback Statute. The settlement, which is not a determination of liability, resolves specific allegations that MedStar paid kickbacks to MidAtlantic Cardiovascular Associates, a cardiology group based in Maryland, in exchange for patient referrals.

Broadly speaking, the Anti-Kickback Statute prohibits hospitals, physicians, pharmacies, nursing homes, durable medical equipment (DME) companies, pharmaceutical companies, medical device manufacturers, and other medical providers from paying or receiving kickbacks, remuneration, or anything of value in exchange for referrals of patients who will receive treatment paid for by government healthcare programs such as Medicare and Medicaid.

The law seeks to prevent physicians from prescribing medically unnecessary medications or recommending unneeded tests. The Anti-Kickback Statute is also intended to ensure that a physician’s medical judgment is not compromised by financial incentives and is solely based on the best interests of the patient.

The kickbacks in the MedStar case were allegedly paid under the guise of professional service agreements with MidAtlantic physicians that exceeded fair market value. MedStar provided the lucrative agreements, the complaint alleges, in exchange for MidAtlantic referring its patients to MedStar hospitals for expensive cardiac procedures, including various surgeries. According to the whistleblowers’ complaint, some of the services promised and paid for by the agreements were never provided. The alleged conduct occurred over a five-year period between 2006 and 2011.

It is worthy of note that more than eight years ago, in 2010, the government settled a related action arising from the same lawsuit against St. Joseph Medical Center. That hospital paid $22 million for conduct occurring between 1996 and 2006. As part of that 2010 settlement, St. Joseph also signed a corporate integrity agreement (CIA) with the U.S. Department of Health and Human Services addressing patient care issues and requiring the hospital to employ a peer review consultant to ensure accurate billing.

The recent settlement with MedStar also resolves allegations that a former MidAtlantic Cardiovascular Associates physician, who later worked for MedStar, performed unnecessary stent procedures between 2006 and 2012. Under Medicaid and Medicare rules, only procedures that are reasonable and necessary for the diagnosis or treatment of an illness or injury are eligible for reimbursement. The government’s previous 2010 settlement with St. Joseph Medical Center also resolved allegations that yet another MidAtlantic Cardiovascular Associates physician performed unnecessary stent procedures.

All of these alleged frauds were revealed by multiple whistleblowers in two different lawsuits. The kickback allegations were brought by three cardiac surgeons and the medical necessity allegations were brought by former patients. If their qui tam cases are successful, whistleblowers are entitled to receive a monetary award of between 15 and 25 percent of the government’s recovery. In these two cases, the three cardiac surgeons who blew the whistle on the alleged kickbacks will receive $5.18 million between them and the patients who blew the whistle on the medical necessity allegations will share $420,000.

As these cases demonstrate, the vigilant and discerning eyes of doctors, nurses, administrative professionals, and hospital employees are essential in combating the increasing number of alleged frauds involving kickbacks, given that business relationships such as the one between MedStar and MidAtlantic Cardiovascular Associates are often opaque and require the perspective of insiders.