Catch of the Week: Detroit Medical Center

This week’s Department of Justice (DOJ) “Catch of the Week” goes to Detroit Medical Center, Vanguard Health Systems, and Tenet Healthcare.  On Wednesday, they agreed to pay roughly $30 million to settle government and whistleblower charges of violating the False Claims Act by providing kickbacks to certain referring physicians.  It is just the latest in a string of False Claims Act settlements concerning kickbacks and financially induced healthcare referrals.  Most of them uncovered by whistleblowers on the front line.

In October 2013, Tenet acquired Vanguard owned-and-operated hospitals and outpatient facilities, including Detroit Medical, which operates Sinai Grace Hospital and Harper University Hospital.  According to the government, the Sinai and Harper hospitals provided MD-level healthcare services to 13 physicians at no (or reduced) cost to induce them to refer Medicare patients to Detroit Medical Center facilities.

The government alleged this arrangement violated the Anti-Kickback Statute, which prohibits providing any form of remuneration to induce referrals covered by Medicare (or other federally funded programs).  The purpose of the statute is to insulate medical decision making from improper financial incentives to ensure it is based solely on the best interests of the patients.  A violation of the Anti-Kickback Statute is an automatic violation of the False Claims Act.

As the government made clear in announcing the settlement, it has a zero-tolerance for healthcare kickbacks because of its potential to taint medical judgment.  U.S. Attorney Dawn N. Ison for the Eastern District of Michigan pointed to the settlement as a clear warning to physicians to make patient referrals based only “on their own professional judgment and the medical needs of their patients, not personal financial benefit.”  Special Agent Mario Pinto of the Department of Health and Human Services Office of Inspector General put it even more starkly: “As this case demonstrates, those who enter into such improper arrangements and put the safety of their patients at risk will be held accountable.”

It is no surprise that healthcare kickbacks are a perennial priority for DOJ in its fraud enforcement activity.  In the last few weeks alone, the government settled or resolved four of these actions.  This included a $3.5 million settlement with a Bronx nursing home and administrator for paying a supervisor at a nearby hospital for patient referrals; a $625,000 settlement with a pain management practice and physician for taking kickbacks in exchange for referrals to a drug testing lab; a $490,000 settlement with a home care agency, its owner, and two physicians for paying kickbacks in the form of sham medical director or sublease agreements in exchange for patient referrals; and most notably, the $487 million judgment against Precision Lens for kickbacks to surgeons to use Precision products in surgeries covered by Medicare.

DOJ’s success in going after healthcare kickbacks was likewise a primary focus of its most recent year-end roundup of False Claims Act successes.  Included among the numerous kickback actions last year that the government highlighted were its $900 million settlement with Biogen, $24 million settlement with Philips, $18 million settlement with Flower Mound Hospital, and $13 million settlement with Kaléo, just to name a few.

As with this week’s Catch, virtually all these kickback actions were initiated by whistleblowers under the qui tam provisions of the False Claims Act, which allow individuals to act as private attorneys general and bring actions against those defrauding the government.  In return, the whistleblower is entitled to up to 30 percent of any government recovery.

The whistleblower in the Detroit Medical action was Dr. Jay Meythaler, a former employee of Detroit Medical affiliate Wayne State University Medical School.  He will receive a whistleblower award of roughly $5.2 million.  He follows a long line of successful whistleblowers who have been rightly rewarded for their courage in taking a stand against fraud.  Especially in the kickbacks area where their inside knowledge is often the only way of uncovering what can be complex and cleverly disguised financial inducement arrangements.

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