Improper Physician Kickbacks Get Big Penalties


Inappropriate kickbacks to physicians led to million-dollar settlements for one health system and laboratory before the close of 2013.The most recent settlement involves St. James Healthcare in Butte, Mont., and its Denver-based parent company, Sisters of Charity of Leavenworth Health System agreeing to pay $3.85 million as a result of alleged violations of the Anti-Kickback Statute, the Stark Law and the False Claims Act, which they disclosed to the government.

According to the Department of Justice (DoJ), the healthcare organizations provided financial benefits to physicians and physician groups making referrals to the Montana hospital. Allegedly, St. James and these physicians were involved in a joint venture involving the operation of a medical office building on the St. James campus.

The financial benefits to referring physicians and physician groups “included a payment to the joint venture that increased the share values for the physicians and physician groups in the joint venture and resulted in below fair market value lease rates for the physicians renting space in the medical office building,” the DoJ has revealed.

Additionally, incentives came in the form of unfair lease rates for where the office building was constructed and similarly unfair value arrangements around share facilities and services.

“This matter is of great significance to Montanans because it helps ensure federal health care programs deliver services in a cost-effective and efficient manner,” United States Attorney for the District of Montana Michael W. Cotter said in a public statement. “We are encouraged that hospitals like St. James Healthcare are taking these issues seriously by reviewing their operations and making disclosures to the government where necessary.”

The second settlement centers of Abbott Laboratories paying kickbacks to physicians to use its heart-related products:

The settlement resolves allegations that Abbott knowingly paid prominent physicians for teaching assignments, speaking engagements and conferences with the expectation that these physicians would arrange for the hospitals with which they were affiliated to purchase Abbott’s carotid, biliary and peripheral vascular products. As a result, the United States alleged Abbott violated the Anti-Kickback Act and caused the submission of false claims to Medicare for the procedures in which these Abbott products were used.

The Illinois-based company has agreed to pay $5.475 million to resolve its alleged violation of the False Claims Act. According to the DoJ, the allegations were first brought to its attention in a lawsuit filed by former Abbott employees Steven Peters and Douglas Gray under the qui tam provision of the act. The successful resolution means that the whistleblowers will receive a total payment of more than $1 million.

“Physicians should make decisions regarding medical devices based on what is in the best interest of patients without being induced by payments from manufacturers competing for their business,” US Attorney Bill Killian of the Eastern District of Tennessee said publicly.

Since the beginning of 2009, the DoJ has recouped more than $17 billion as a result of False Claims Act cases, most of which involved attempts to defraud federal healthcare programs.


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    • Editor-in Chief:
    • Theodore Massey
    • Editor:
    • Robert Sokonow
    • Editorial Staff:
    • Musaba Dekau
      Lin Takahashi
      Thomas Levine
      Cynthia Casteneda Avina
      Ronald Harvinger
      Lisa Andonis

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