Adventist Health pays US, CA $14.1M to resolve false claims act allegations

FRESNO, Calif. -  

Adventist Health System/West, and its affiliated hospital White Memorial Medical Center have agreed to pay the United States and the State of California $14,116,000 to settle claims that it violated the False Claims Act, the Justice Department announced today. Adventist Health is headquartered in Roseville, in the Eastern District of California, and operates 19 hospitals and more than 150 clinics in California, Hawaii, Oregon and Washington. White Memorial Medical Center is a teaching hospital in Los Angeles.

The settlement announced today resolves allegations that (1) Adventist Health improperly compensated physicians who referred patients to the White Memorial facility by transferring assets, including medical and non-medical supplies and inventory, in a transaction that appeared to be below fair market value. (2) White Memorial paid referring physicians compensation that the United States contended was above fair market value to provide teaching services at its family practice residency program. The United States alleged that these payments violated the Anti-Kickback Act and the Stark Statute, and, by extension, the False Claims Act. Approximately $11.5 million of the settlement will be paid to the U.S. Government, most of which will benefit the Medicare Trust Fund. The remaining $2.6 million will be paid to California’s Department of Health Care Services.

The Anti-Kickback Act prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid and/or other federally funded programs. The Stark Statute prohibits a hospital from submitting claims for patient referrals made by a physician with whom the hospital has an improper financial arrangement. Both the Anti-Kickback Act and the Stark Statute are intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is instead based on the best interests of the patient.

“The settlement announced today underscores one of the key purposes of the Stark and Anti-Kickback laws — to ensure that the judgment exercised by health care providers is based on legitimate patient needs and is not influenced by illegal payments,” said Benjamin B. Wagner, United States Attorney for the Eastern District of California.

“Kickbacks and other unlawful financial arrangements cost taxpayer dollars and undermine the integrity of medical judgments,” said Stuart F. Delery, the Acting Assistant Attorney General for the Civil Division. “The Department of Justice is committed to making sure that physician referrals do not involve payments made in violation of federal law.”

“Payouts made by hospitals and clinics — as the government alleged in this case — raise substantial concerns about physician independence and objectivity,” said Ivan Negroni, Special Agent in Charge of the Office of Inspector General, U.S. Department of Health and Human Services San Francisco region. “Taxpayers and vulnerable patients rightfully expect such payments to be investigated and pursued.”

The settlement announced today resolves a lawsuit filed in the Eastern District of California under the qui tam, or whistleblower, provisions of the False Claims Act. These provisions allow private citizens to bring civil actions on behalf of the United States and share in any recovery. The whistleblowers in this case will collectively receive $2,839,219 of the recovery.

As part of the settlement, White Memorial has entered into a comprehensive five-year Corporate Integrity Agreement with the Office of Inspector General of the U.S. Department of Health and Human Services to ensure its continued compliance with federal health care benefit program requirements.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $10.2 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are more than $14 billion.

This case was investigated by the United States Attorney’s Office for the Eastern District of California, the Justice Department’s Civil Division, and the Office of Inspector General of the Department of Health and Human Services. Assistant United States Attorney Catherine Swann handled the matter for the United States. The claims settled by this agreement are allegations only, and there has been no determination of liability.

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