The DOJ announces huge False Claims Act settlement with Adventist Health System

The United States Department of Justice (DOJ), in what is becoming a somewhat regular occurrence, announced another potentially record-breaking False Claims Act settlement. In this case, Adventist Health System agreed to pay more than $115 million to settle allegations that it violated the False Claims Act as a result of improper compensation arrangements it allegedly maintained with some of its employed physicians. Examples of alleged excessive compensation listed in the complaint included paying the leases of a surgeon's BMW and Mustang, a $366,000 base salary for a family practitioner , which was double what similar doctors in the area were being paid, and total annual compensation of $710,000 for a dermatologist who worked just three days per week.

Adventist Health System operates approximately 44 hospitals in 10 states. The settlement relates to allegations concerning hospitals operated by Adventist in Florida, North Carolina, Tennessee and Texas. The settlement is notable for a number of reasons. First, the allegations were initiated by whistleblowers pursuant to the qui tam provisions of the False Claims Act. The qui tam provisions permit individuals to file complaints on behalf of the United States and, if the claim is successful, to share in the recovery. According to news reports about this settlement, the individuals who filed the whistleblower complaints held positions of chief operating officer of physician enterprises, risk manager, executive director of physician services and compliance officer of physician offices. This case serves as a reminder that all providers should be aware that any employee, no matter the individual’s position within an organization, may become a whistleblower. Moreover, employees who regularly come into contact with sensitive information as part of their job duties could be considered as the employees who pose the highest risk of becoming a whistleblower. All providers should endeavor to be aware of any issues that could raise potential False Claims Act concerns and address those issues immediately to prevent possible whistleblower claims.

Second, the issues in this case arose as a result of compensation arrangements that Adventist facilities had in place with employed physicians. According to the DOJ press release, “Adventist-owned hospitals…allegedly paid doctors’ bonuses based on the number of tests and procedures they ordered[.]” The government finds these arrangements to be particularly concerning, not only because they potentially violate the law, but also because they “can undermine patients’ medical care” and increase costs for patients and the government. This case illustrates the attention that all financial arrangements with referring physicians should receive, including employment relationships with referring physicians. Under the Stark Law, all compensation arrangements with referring physicians must strictly comply with defined “exceptions.” The employment exception requires, among other things, that compensation not exceed fair market value. Thus, a regular analysis of all employed physicians’ compensation arrangements should be conducted to ensure that physician compensation does not exceed fair market value. 

Finally, as noted by the DOJ’s press release, this settlement demonstrates the government’s ongoing efforts to combat what it believes to be health care fraud. Since January 2009, the DOJ has recovered more than $16 billion in cases involving federal health care programs. The government’s efforts to continue to pursue these claims do not appear to be slowing down and are anticipated to continue into the future. Accordingly, providers should be diligent in their compliance efforts to identify and resolve any identified issues as quickly as possible.