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Government Intervenes In Physician Compensation Case Alleging Compensation For Referrals

Physician Compensation Stark LawThe Department of Justice has announced that it will intervene in a  False Claims Act lawsuit against a Mobile, Alabama based health system and diagnostic facility.  The lawsuit alleges that the provider billed Medicare for services referred by a group of physicians, in violation of the Stark Law and Anti-Kickback Statute.

The Stark Law forbids a clinic or hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the entity.  The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of services or items covered by federal health care programs, including Medicare.  The lawsuit alleges that the physician group was improperly paid  compensation that included a percentage of the money collected from Medicare for tests and procedures the doctors referred to the clinic.

The original lawsuit was filed in  2011 by a former physician in the group under the qui tam, or whistleblower, provisions of the False Claims Act.  Those provisions authorize private parties to sue on behalf of the U.S. and receive a portion of any recovery.  The act also permits the government to intervene and take over a lawsuit.   In this case, the government has decided to intervene in the case.

The government’s investigation has been a coordinated effort by the Department of Justice, Civil Division, Commercial Litigation Branch; the U.S. Attorney’s Office for the Southern District of Alabama; the Department of Health and Human Services Office of Inspector General; and the FBI.

This case illustrates the risk of providers of designated health services compensating physicians based on the value of referrals.  The Stark Law permits physicians to be compensated based on their personal production in most cases.  However, when payments cross the line to include the fruits of referrals for the technical component of their services, the Stark Law is implicated.  It appears that in this case, the compensation arrangement is alleged to have crossed the line to include the value of referrals.

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John H. Fisher

Health Care Counsel
Ruder Ware, L.L.S.C.
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