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Constantine Cannon Settles Case Alleging Kickbacks to Multi-Practice Physicians’ Group for Referrals to Wholly Owned Ambulatory Surgery Center – Whistleblower Was Former CEO

Posted  October 9, 2020

Constantine Cannon, on behalf of whistleblower Jeffery Neuberger, has settled a False Claims Act action against Mid Dakota Clinic and a related entity.  Mr. Neuberger, the former CEO of the medical group, filed his case in 2017 alleging a scheme in violation of the Anti-Kickback Statute (AKS) between the medical group and its wholly owned ambulatory surgery center (ASC).  At issue was a financial arrangement whereby all of the multi-practice physicians received revenues from referrals to the ASC.  The lawsuit also named as a defendant the clinic’s related real estate business as an alter ego of the medical clinic.

The AKS and Ambulatory Surgery Centers (ASCs)

The AKS is intended to prevent abuses (such as unnecessary treatments) that can occur when a doctor makes money from referring patients for goods or services paid by Medicare or other government healthcare programs.  In this case, the medical group allegedly continued the flow of lucrative revenues from ASC services to referring physicians even after knowing the arrangement was unlawful.  Defendants who knowingly seek federal healthcare program payments for claims tainted by kickbacks may violate the False Claims Act.

There is a “safe harbor” from an AKS violation if physician-ownership of an ambulatory surgery center meets certain strict requirements.  That safe harbor is limited in circumstances such as this one: it permits doctor-ownership of ASCs only if (1) the owners are surgeons who perform procedures or surgeries in the ASC (essentially as a functional extension of his or her office), or (2) the physicians are in no position to make or influence referrals to the ASC.  42 C.F.R. § 1001.952(r).  Neither was true: all of the clinic doctors allegedly could make or influence referrals to the ASC, and all of them, not only the surgeons, received the revenues from the ASC referrals.  Some of the revenues came from taxpayer Medicare dollars.

Case Settlement

In November 2019, Mid Dakota Clinic, its affiliated building partnership, and insurer agreed to pay the United States $4.15 million to resolve the case.  The clinic additionally paid $1.3 million for the whistleblower’s attorneys’ fees and costs, for a total payment of $5.45 million.  The United States awarded Mr. Neuberger a 25% relator’s share of its recovery.  Following the settlement, the parties and the United States stipulated to the case dismissal in January 2020.

The Constantine Cannon team of Jessica T. Moore, Alysia A. Solow, James J. Kovacs, Margaux Poueymirou, Yo W. Shiina, Hallie Noecker, and Max Voldman represented Mr. Neuberger.  The case is U.S. ex rel. Jeffery Neuberger v. Mid Dakota Clinic, PC and Mid Dakota Medical Building Partnership, LLP, (D.N.D.) Case No. 1:17-cv-00015-DLH-ARS (filed 6/6/17).

To read more about healthcare fraud and kickbacks as a basis of a whistleblower case, read here.

Constantine Cannon has the world’s largest international whistleblower practice, with offices in New York, Washington, D.C., San Francisco, and London. The firm’s team of dedicated whistleblower lawyers have successfully represented whistleblowers in numerous matters under federal and state False Claims Acts as well as the whistleblower programs of the IRS, SEC, CFTC, DOT, and others.

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Tagged in: Anti-Kickback and Stark, FCA Federal, Healthcare Fraud, Medicare, Provider Fraud, Whistleblower Rewards,


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