DOJ Penalizes Doctors, Hospitals, & Medical Practices Millions to Settle Allegations of Anti-Kickback Statute Violations

The US DOJ continues to aggressively pursue claims that medical practices are violating the Anti-Kickback Statute and Stark Law.

Most Anti-Kickback Statute and Stark claims are litigated through the False Claims Act when the payments are made to physicians and medical practices and other healthcare entities by federal healthcare agencies such as Medicare, Medicaid, and TRICARE. Every medical doctor, medical practice, laboratory, pharmacy, and health care company should review how these federal laws affect their practice, with an experienced healthcare lawyer. Skilled healthcare lawyers understand the laws and the consequences for failure to comply as well as best compliance practices and risks

The consequences for violating these three main laws can be severe. Depending which law is filed by the DOJ, there may be criminal charges in addition to the civil charges. The damages the DOJ seeks are more than just the receipt back of improper payments where, for example, a doctor received improper referrals and billed Medicare for payments for those patient referrals. The damages can include, in addition to repayment, treble damages, statutory penalties, and interest. The DOJ may also seek to force the medical practice to cease operations. If you do stay in business, the DOJ may prohibit your medical practice from submitting payment requests to Medicare and other government health care agencies for years or even decades.

The US Department of Justice, in 2019 as in past years, has announced several multi-million dollar settlements against healthcare providers for violations of the AKS and Stark Law self-referrals laws. Violations of each of these laws generally also means that the violator can also be charged under the federal False Claims Act. These laws are designed to regulate the financial relationship between health care practices, doctors, and hospitals.

In some cases, there are possible ways to meet the standards of the AKS, Stark, and not run afoul of the False Claims Act, while still making patients a priority and still working to make your medical practice or company as productive as possible – within the parameters of these laws. There are also state laws that a skilled healthcare lawyer in your state should explain and review with you as they mirror the federal laws even if the federal side does not specifically apply.

Stark Law has a specific list of exceptions to the prohibition against doctors referring patients to a designated healthcare service where the physician or an immediate family member has a financial interest.

The AKS has safe harbors which cover many of the same exceptions as Stark. The Stark exceptions and the AKS safe harbor rules generally require that any arrangements be for fair market value, be in writing, and show that the arrangements are not based on the volume or percentage of referrals.

The arrangements a skilled healthcare fraud and abuse lawyer can review with your medical practice or healthcare company include:

• Contracts for physician services
• In-house ancillary services
• The use of Managed Service Organizations (MSOs)
• The rental of office space and equipment
• Recruiting doctors
• Other arrangements that are referenced in the Stark Law and AKS statutes and regulations

Sanford Health and Related Entities Agree to Pay $20.25 Million to Resolve Allegations Regarding Kickbacks and Unnecessary Spinal Surgeries

The Department of Justice announced on October 28, 2019 that several hospital entities collectively called Sanford (Sanford Health, Sanford Medical Center, and Sanford Clinic) agreed to resolve, without admitting liability, claims that the healthcare entities:

• Knowingly submitted false claims to federal healthcare programs
• Resulting from violations of the Anti-Kickback Statute (AKS)
• And medically unnecessary spinal surgeries.

The AKS precludes the offer, payment, solicitation, or the receiving of various forms of remuneration to obtain referrals for services or items that are then billed to Medicaid, Medicare, or other federal agencies. Violations of the AKS are generally also considered grounds for filing charges for violations of the federal False Claims Act (FCA). Kickbacks and any form of self-referral are considered improper because the health of the patient should come before any financial incentive of the physician making the referral. Kickbacks affect more than the just the patient. Kickbacks affect fair competition among other health providers. Kickback schemes also affect taxpayers because taxpayers fund Medicare, and other health programs. The improper payments are generally passed onto to the taxpayer.

The claim by the DOJ revolves around charges that Sanford:

 “knew that one of Stanford’s top neurosurgeons was improperly receiving kickbacks from his use of implantable devices distributed by his physician-owned distributorship (POD). “

The DOJ further alleged that colleagues of the neurosurgeon and others repeatedly warned Sanford that the doctor was using devices that he had a substantial financial interest in and that the procedures were not medically necessary. The DOJ added, in the announcement, that Sanford

“continued to employ the neurosurgeon, continued to allow him to profit from the devices he used in surgeries performed at Sanford, and continued to submit claims to federal healthcare programs for these surgeries, including procedures that were medically unnecessary.”

The DOJ further announced that in addition to the monetary settlement that Sanford also agreed to enter into “a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General.” A CIA is used to help force defendants in AKS and FCA cases to:

• Implement a compliance program
• Implement a program to assess risks, and
• Hire an Independent Review Organization – which will review the Medicare claims and Medicaid claims that are submitted
• Increase “individual accountability by requiring compliance-related certifications from Sanford Medical Center’s board of directors and key executives.”

The settlement announcement emphasized that Physician-Owned Distributorships (PODs) are “inherently suspect under the Anti-Kickback Statute.”– Because kickbacks are focused on provider profits and not the health and safety of the patient.

The DOJ agreed to intervene in a lawsuit that was originally filed by two other surgeons who were employed by Sanford. These two doctors filed a whistleblower claim under the FCA which entitles the whistleblowers to $3.5 million of the settlement amount for the whistleblowers’ efforts in filing the original legal complaint.

Sanford, as part of the agreement, also agreed to help the DOJ in the agency’s claims against the neurosurgeon and other related co-defendants. The medical entities also ended the employment relationships with the neurosurgeon in question and the health entities have prohibited “all Sanford physicians from profiting from the physicians’ use of medical devices at Sanford.”

US DOJ files FCA claims, based on the Anti-Kickback Statute, against the neurosurgeon and several doctor-owned distributorships

While the case against Sanford was settled, a complaint against the neurosurgeon and the distributorships continued. On November 14, 2019, the DOJ filed complaints against a South Dakota neurosurgeon, Medical Designs LLC, and Sicage LLC alleging that the neurosurgeon was paid kickbacks for uses certain medical devices in spinal surgeries. The two medical companies are distributorships for the medical devices. The companies are owned and operated by the neurosurgeon.

The DOJ alleged that there were multiple kickback schemes designed to pay the physician hundreds of thousands of dollar in exchange for using the medical devices. In addition, the DOJ claimed that the doctor had been warned that the spinal surgeries were not medically necessary. The DOJ announcement added that:

• “Improper inducements have no place in our federal healthcare system where medical decisions should be based on the healthcare needs of patients and not on a physician’s personal financial interest.”
• “Government health program patients should be confident that surgical procedures are medically needed, not performed to increase physician profits,” said Curt L. Muller, Special Agent in Charge of the Office of Inspector General at the U.S. Department of Health and Human Services. “For years our fraud alert has warned that physician distributorships are inherently suspect under the Anti-Kickback statute.”

The DOJ filed the lawsuit based on the qui tam/whistleblower provisions of the False Claims Act. The DOJ agreed to intervene after a whistleblower had filed the initial complaint.

Violators of the AKS and the FCA can be ordered to pay much more than the actual damages – the amount of the payments that were improperly paid by Medicare and other agencies. Violators can also be ordered to pay treble damages and statutory penalties.

The case is captioned United States ex rel. Bechtold, et al. v. Asfora, et al., No. 4:16-cv-04115-LLP (D.S.D.). “The claims asserted against the defendants are allegations only, and there has been no determination of liability.”

DOJ Files a Complaint against a Home Health Agency and Two Owners for Kickbacks

The US DOJ filed a complaint on May 24, 2019 against “Doctor’s Choice Home Care Inc. (Doctor’s Choice), Timothy Beach, and Stuart Christensen alleging False Claims Act violations arising from the alleged payment of kickbacks in the form of sham medical director agreements and payments to the spouses of referring physicians” The two individual defendants are partial owners of the home health agency. The home health agency is based in Florida.

The DOJ stated, as Justice Department regularly do in kickback cases that health providers must put the safety and needs of the patients before any financial profits. Kickbacks affect the integrity of medical care, medial competition, and the entire federal medical system that pays for these unnecessary or improper treatments and services.

The DOJ complaint asserts that the home agency, with the knowledge of the two owners, “paid kickbacks in the form of sham medical directorships to three physicians to refer patients to Doctor’s Choice. All three physicians allegedly did little, if any, of the work for which Doctor’s Choice paid the physicians as medical directors.”

“Sham medical director agreements to induce patient referrals violate the Anti-Kickback Statute and the Stark Law. Doctor’s Choice also allegedly paid some employees in a manner that accounted for the volume of referrals by their physician spouses, in violation of the Stark Law. “

The DOJ intervened in a whistleblower/qui tam action filed under the False Claims Act which provides whistleblowers a financial incentive in the form of an award of the percentage of the recovery. Recoveries can include treble damages and other penalties.

Some of the main factors the DOJ reviewed to force healthcare companies to pay millions in settlements for alleged violations of the AKS and Stark Law include:

• Knowledge and tacit approval by a hospital that one of its doctors were receiving kickbacks through a physician-owned distributorship
• Conducting surgeries that are not medically necessary
• Creating sham medical directorships

Contact Cohen Healthcare Law Group, PC is an experienced regulatory compliance law firm. We help you understand which federal and state laws apply to your practice or health company.