September 18, 2015

Stark Law Enforcement Trend: Hospital and Individual Physician Settle Allegations of Stark Law Violations and Illegal Upcoding

By Tim McCormack and Molly Knobler (published on SCCE’s Compliance and Ethics Blog)

The Department of Justice’s (“DOJ”) recent string of victories against hospitals that have (allegedly) paid illegal inducements to employed physicians continues.  On September 4, 2015, DOJ settled two False Claims Act (“FCA”) suits with Columbus Regional Healthcare System (“Columbus”) and Dr. Andrew Pippas.  Columbus agreed to pay between $25 and $35 million (depending on its future financial performance) and Dr. Pippas agreed to pay $425,000.

The suits, both brought by whistleblower Richard Barker, alleged  that Columbus paid Dr. Pippas “excessive salary and directorship payments” in violation of the federal Stark Law – which prohibits hospitals from paying kickbacks to doctors in exchange for referrals of Medicare and Medicaid patients.  The suits also alleged that Columbus had fraudulently inflated (upcoded) its bills to the Government for office visits and radiation therapy performed by Dr. Pippas and other oncologists.

One significant feature of the settlement is that Dr. Pippas personally paid a substantial sum.  In years past, DOJ primarily focused on the hospital, drug company, or nursing home that paid the kickback rather than the doctor who got it.  Recently, however, DOJ has become more aggressive in pursuing those who receive kickbacks.

This trend should not only deter physicians and others from taking kickbacks, but also encourage them to consider blowing the whistle when offered illegal inducements in exchange for referrals.  In a recent notable case involving the Stark Law, a doctor who refused to take kickbacks blew the whistle on South Carolina-based Tuomey Healthcare System, leading to a judgment against the hospital for $237 million for violation of the False Claims Act and the Stark Law.  Under the FCA, the whistleblower stands to get between 15% and 30% of any recovery.

Another notable feature of the Columbus settlement is that it exposed the upcoding and double billing of services performed and ordered by the kickback recipient.  While the Stark Law does not require proof of overutilization or upcoding, that is one of the primary evils the law is intended to combat.  Those paying kickbacks typically expect to see a return on their illegal investment.  Sometimes, it is enough if the physician merely sends his or her existing patients to the hospital.  More often, though, the physician must order more tests, perform more procedures, or upcode their claims to “earn” the illegal kickbacks.

Unfortunately, this latest settlement will likely not be the last.  News reports include a steady stream of stories of hospitals in tough financial straits, and those which have improved their bottom lines by “increasing volume” or “increasing patient revenue.”  Are those volume and revenue increases coming from legitimate operational and marketing initiatives, or are the hospitals taking a short-cut through kickback valley by paying physicians fat salaries, bonuses and medical director or consulting fees in exchange for referrals and upcoding?

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