Government Increases Scrutiny of Health Systems that Pay Bonuses to Referring Medical Practices

Earlier this month, the Justice Department filed a complaint-in-intervention in a False Claims Act qui tam action against Alabama health system Infirmary Health System and medical group Diagnostic Physicians Group, alleging that the system illegally paid bonuses to the medical group based on the number of patients referred for medical tests. According to the complaint, these alleged payments were in violation of the Stark and Anti-Kickback Statutes, thus allegedly tainting hundreds of thousands of tests from July 2005 through December 2011 and allegedly costing the Medicare program millions of dollars in false claims. The suspect medical procedures included clinical laboratory services, diagnostic imaging tests, X-rays, ultrasounds, echocardiograms and nuclear imaging tests.

Such alleged bonus payments raise cautionary flags. Indeed, the Justice Department regularly scrutinizes such alleged arrangements that potentially incentive health care providers to inflate the number of tests ordered.  As Acting Assistant Attorney General Stuart Delery stated in a prepared statement, “Financial arrangements that compensate physicians for referrals encourage physicians to make decisions based on financial gain rather than patient needs.”

According to the government’s complaint, there were internal documents indicating that the purpose of the financial arrangement was to steer patients to the health system. For example, the complaint quotes a 2009 senior management email stating, “A strategic goal was achieved to affiliate Northside Clinic with Diagnostic & Medical to stop leakage to Springhill via referrals to Cardiology Associates and Pulmonary Associates. Diagnostic & Medical successfully established Cardiology outreach to Monroeville, increased referrals to [Mobile Infirmary].”

As is often the case, some of the physicians allegedly raised concerns about the purported bonus payments flowing from the health system to the medical group. Most notably, qui tam relator Dr. Christian Heesch, a cardiologist with Diagnostic Physicians Group from 2003 until 2011, claims in his qui tam complaint that he was fired after voicing concerns to his colleagues.

If the Government succeeds in recovering Medicare funds from Infirmary Health System and Diagnostic Physicians Group, Dr. Heesch could receive a whistleblower reward worth millions of dollars.

This case has caught the attention of physicians across the country, who are concerned that their medical groups may be receiving similar bonus payments allegedly in violation of federal anti-fraud laws. Perhaps Dr. Heesch’s fight will encourage such providers to step forward.

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