Hospitals Regularly Violate the Law When Acquiring Medical Practices

All Children’s Hospital (located in Florida) agreed to pay $7 million to settle a False Claims Act qui tam action, alleging that the hospital, through its subsidiaries, “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.” According to the qui tam complaint, 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.” For stepping forward, the qui tam relator received a reward of nearly $2 million.

When a hospital system treats government healthcare program beneficiaries, they are required to abide by various laws and regulations, including the Stark Statute and its associated regulations. In a nutshell, hospital systems violate the Stark Statute when they offer to pay compensation to physicians which far exceeds fair market value, is commercially unreasonable, and is varied in accordance with the physicians’ anticipated referrals with the intention to induce physicians to increase their referrals to the hospital system. Hospital systems violate federal and state False Claims Acts when they submit claims to the government arising out of a physician/hospital relationship that violates Stark.

In recent years, hospital systems have acquired thousands of small and mid-sized practices. According to a recent survey by the Medical Group Management Association, there has been a 75% increase in the number of active doctors employed by hospitals or hospital systems since 2000. This trend accelerated sharply after the enactment of the Affordable Care Act.

With substantial whistleblower rewards offered under the False Claims Act, the government is hopeful that courageous physicians and hospital administrators will step forward and expose improper financial arrangements that run afoul of the Stark Statute.

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