June 22, 2010

Physician Whistleblower Alleging Anti-Kickback and False Claims Act Violations Gets $23.5 Million in Government Settlement With Hospital – Increased FCA Enforcement Activity Likely

Holland & Knight Alert
Maria T. Currier

The Health Alliance of Greater Cincinnati (HAGC), a Cincinnati-based owner and operator of hospitals, and one of its former member hospitals, The Christ Hospital (TCH), agreed to pay the United States $108 million in settlement of an Anti-Kickback Statute (AKS) and False Claims Act (FCA) whistleblower lawsuit. In light of this settlement, as well as the recently enacted Patient Protection and Affordable Care Act (PPACA), which further expands the provisions of the FCA, the federal government’s capability and commitment to enforcement in relation to health care fraud should not be underestimated.

The FCA’s qui tam provisions allow private parties to file whistleblower lawsuits on behalf of the United States and to share in any recovery, which oftentimes is substantial. The lawsuit against HAGC and TCH was brought by Dr. Harry Fry, a cardiologist and former employee at TCH. Dr. Fry will receive $23.5 million from the settlement.

After joining the lawsuit, the United States alleged that TCH, a 555-bed acute care hospital in Mount Auburn, Ohio, violated the AKS and the FCA by providing physicians with unlawful payments or work opportunities in exchange for cardiac patient referrals and by subsequently submitting claims to Medicare and Medicaid for services resulting from those referrals.

Although it continues to deny the government’s allegations, TCH decided to enter into the settlement “to avoid the risk of the in excess of a billion dollar award that was sought by the government,” explained Susan Croushore, President and CEO of TCH.

The government’s emphasis on fighting health care fraud, as manifested by the lawsuit against HAGC and TCH, has been highlighted by the PPACA. Prior to the enactment of the PPACA, and with few exceptions, FCA whistleblowers were barred from pursuing publicly disclosed claims. However, the PPACA has expanded the FCA’s public disclosure bar by:

  • allowing whistleblowers to bring actions when they have independent knowledge that materially adds to publicly disclosed allegations
  • limiting public disclosures to the federal setting by not including state or local reports or proceedings
  • allowing the United States to waive the application of the public disclosure bar at its discretion

In light of increased risks of whistleblower activity – with the accompanying risk of multimillion dollar settlements – hospitals should carefully examine their existing arrangements with physicians and implement rigorous compliance programs.

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