On May 16, the United States Attorney’s Office for the Western District of New York announced that Buffalo-based Catholic Health System (CHS) agreed to pay $3.3 million to resolve allegations that it violated the False Claims Act (FCA).
According to local news coverage reporting the settlement, the government alleged that CHS violated the Stark Law by entering into compensation arrangements with non-employee physicians “whose referrals led to Medicare claims for services such as lab testing, hospital care, and medical supplies.” The DOJ contended that the compensation arrangements did not fall under a Stark Law exception and that the compensation paid to the physicians was was either not commercially reasonable or exceeded fair market value for the administrative services performed.
CHS — through its general counsel — released the following statement: “Defending these types of subjective allegations requires an unsustainable and unacceptable allocation of Catholic Health resources…This investigation was never about the quality of care provided to our patients. By resolving the case now, we can move forward and remain fully focused on delivering the highest standard of care.”
Under the Stark Law — formally known as the Physician Self-Referral Law — if a physician (or an immediate family member of the physician) has a financial relationship with an entity such as a hospital, that physician is prohibited from referring certain “designated health services” to that entity, and that entity is prohibited from submitting claims to Medicare or Medicaid for such services.
There are various exceptions to the Stark Law, including for bona fide employment (i.e., W-2) relationships and personal services arrangements. For the latter, the compensation must be consistent with fair market value and must not take into account the volume or value of federal healthcare program referrals. Violations of the Stark Law — even if unintentional — can lead to civil and administrative penalties and, if claims are submitted to Medicare or Medicaid, can result in significant liability under the False Claims Act.
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The attorneys at Chilivis Grubman represent healthcare providers of all types and sizes in connection with False Claims Act investigations and litigation. If you need assistance with such a matter please contact us.