This week’s Department of Justice “Catch of the Week” goes to the Lexington County Health Services District Inc. (d/b/a Lexington Medical Center). Yesterday, the South Carolina hospital agreed to pay $17 million to resolve allegations it violated the False Claims Act and the Physician Self-Referral Law (known as the Stark Law) by maintaining improper financial arrangements with 28 physicians. See DOJ Press Release.
The Stark Law generally bars a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital. It is designed to ensure that physician referrals are based on the medical needs of the patients, not the financial interests of the physician. According to the government, Lexington Medical Center violated the Stark law in connection with practice purchase agreements or employment agreements it entered into with 28 physicians. Specifically, the government alleged that each of these agreements illegally tainted the referral process because they were tied to the volume or value of the physician referrals, were not commercially reasonable or otherwise provided compensation in excess of fair market value.
In announcing the settlement, DOJ Civil Chief Benjamin Mizer made clear the strong purpose of the Stark Law and the government’s commitment to enforcing it:
This case demonstrates the United States’ commitment to ensuring that doctors who refer Medicare beneficiaries to hospitals for procedures, tests and other health services do so only because they believe the service is in the patient’s best interest, and not because the physician stands to gain financially from the referral.
The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act by former Lexington Medical Center physician Dr. David Hammett. He will receive a whistleblower award of roughly $4.5 million from the proceeds of the government’s recovery.
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