Catch of the Week: Gramercy Cardiac Diagnostic Services

This week’s Department of Justice (DOJ) Catch of the Week goes to Gramercy Cardiac Diagnostic Services and its owner Klaus Peter Rentrop.  Gramercy provides cardiac diagnostic imaging services, previously operating out of four offices in New York City.  On Monday (September 18), the DOJ announced Rentrop and Gramercy will pay $6.5 million for violating the False Claims Act and Anti-Kickback Statute through their payment of millions of dollars in kickbacks to physicians for patient referrals.  Apparently, the payout would have been higher for the ability of Rentrop and Gramercy to pay more.  In addition, Rentrop will relinquish his ownership in Gramercy and pay the government a portion of the proceeds of any sale of his practice.

The Anti-Kickback Statute prohibits medical providers from paying or receiving kickbacks, remuneration, or anything of value in exchange for referrals of patients covered by government healthcare programs such as Medicare and Medicaid.  It is extremely broad in its scope and application and basically covers any consideration in exchange for patient referrals.  In this case, the kickbacks took the form of inflated office “rental payments” and fees paid to contracted cardiologists.

Specifically, the government’s complaint alleged that for more than ten years, Rentrop and Gramercy entered into office space rental agreements — often in excess of fair market value — with physicians to induce them to refer patients to Gramercy-contracted cardiologists who then ordered diagnostic tests from Gramercy.  To ensure the kickback scheme was profitable, Rentrop insisted that Gramercy’s “rental payments” resulted in a minimum return on investment of at least 300%.  The scheme led to the referral of tens of thousands of patients to the Gramercy-contracted cardiologists, who in turn referred more than 23,000 patients to Gramercy for cardiac scans, many of which were covered by Medicare or Medicaid.

Here are more details of the scheme:

• Gramercy entered into “rental agreements” with more than 130 physicians and medical practices under which Gramercy paid these physicians to lease exam rooms for certain days or hours each month. Gramercy paid more than $11 million under these agreements.
• Gramercy entered into independent contractor agreements with more than 50 cardiologists who saw patients sent by the physicians who had entered into the Gramercy “rental agreements.” These cardiologists in turn referred these patients to Gramercy for diagnostic tests and procedures.
• Gramercy paid these cardiologists a flat fee for each diagnostic test or procedure for which they referred a patient to Gramercy.
• When a particular physician “rental agreement” fell below the minimum return on investment threshold Rentrop established, Gramercy would refuse to pay the physician the amounts due under the agreement. Gramercy terminated several of these agreements because the return on investment through patient referrals was too low.

Going after healthcare kickbacks is a perennial priority for the DOJ.  In announcing this latest enforcement action, U.S. Attorney Damian Williams explained why:

Over more than a decade, Klaus Peter Rentrop and Gramercy Cardiac paid millions of dollars to doctors and their medical practices in exchange for patient referrals for cardiac testing and procedures.  The Anti-Kickback Statute is meant to ensure that when making medical decisions, a doctor considers only the patient’s best interests — not the doctor’s or others’ financial interests.  The defendants violated those doctor-patient relationships through their kickback arrangements, and now they are being held to account.

HHS-OIG Special Agent in Charge Naomi Gruchacz echoed this strong sentiment: “Certain violations of the Anti-Kickback Statute can induce medically unnecessary testing and influence physicians’ decision-making inappropriately.”

Like the vast majority of healthcare fraud actions, this one was initiated by a whistleblower under the qui tam provisions of the False Claims Act, which allows private individuals to bring lawsuits against those defrauding the government.  In return, successful whistleblowers are entitled to up to 30% of the government’s recovery.  Over the past 25 years, whistleblowers have recovered billions of dollars in whistleblower rewards under the False Claims Act and have been responsible for tens of billions of dollars in government recoveries.

If you would like more information on what it means to be a whistleblower or think you may have information relating to healthcare fraud, government contract fraud, or any other kind of fraud or misconduct involving a government program, please feel free to contact us so we can connect you with a member of the Constantine Cannon whistleblower lawyer team for a free and confidential consultation.

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