Are Some Health Systems Violating the Law When Acquiring Medical Practices?

In April 2014, All Children’s Hospital, et al. agreed to pay $7 million to resolve a False Claims Act qui tam action, which alleged that the hospital, “hired key physicians at inflated salaries to cut off the physicians from the competition, promised hundreds of thousands of dollars in bonuses and perks, bought out private medical practices, and overpaid new recruits.” It further alleged that the hospital’s plan was to “pay whatever it takes to guarantee that the medical procedures, ancillary services and referrals were directed to All Children’s Hospital.” Once the case was resolved, the qui tam relator received a reward of nearly $2 million.

A year later, in April 2015, the nationwide dermatology practice Family Dermatology agreed to pay over $3 million, resolving three separate qui tam actions alleging that the practice structured Stark Law-violative arrangements by requiring dermatology groups it acquired, to refer all pathology work to an entity owned by the Family Dermatology’s owners.

In both of these settlements, almost all of the qui tam relators were physicians who were allegedly offered the supposedly illegal business arrangements. This similarity underscores an important point about qui tam actions predicated on Stark violations: physicians are in the best position to expose improper financial arrangements that run afoul of the Stark Laws.

In this era of increasing consolidation and competition, some healthcare systems continue to violate the Stark laws and Anti-Kickback laws. Like a line out of The Godfather, healthcare systems are offering deals that medical practices simply cannot refuse.

More information for whistleblowers is located at the Nolan Auerbach & White website.