By Kristina Fiore

Wheeling Hospital in West Virginia will pay $50 million to settle claims that it overpaid physicians -- in some cases, more than $1 million a year -- to drive referrals to its hospital, the U.S. Department of Justice announced.

The DOJ alleged that the hospital defrauded Medicare and Medicaid out of tens of millions of dollars since 2008 because of the scheme, which was first brought to the feds' attention via a whistleblower lawsuit filed in late 2017 by Louis Longo, a former executive vice president at the hospital who will walk away with $10 million of the settlement.

Longo was recruited to Wheeling Hospital from Deloitte in November 2011, hand-picked by then-CEO Ronald Violi (who retired in 2019) with the intention of being his successor, according to Longo's complaint.

Violi had been appointed CEO in January 2006 with the task of turning around a struggling hospital. The year prior, his firm, R&V Associates, had been retained by then-Bishop of Wheeling, Michael Bransfield, to begin the financial transformation of the hospital, which is owned by the Roman Catholic Diocese of Wheeling-Charleston. At that time, the hospital had lost more than $50 million in the 7 years prior, according to Longo's complaint.

But Violi certainly appeared to turn that around. By 2016, the hospital earned an annual profit of nearly $36 million, according to Longo's complaint.

However, the turnaround seems to have its origins in dealmaking that caught the eye of the feds.

Longo and the DOJ charged that the hospital paid some physicians -- notably, ob/gyns, oncologists, cardiologists, and a pain specialist -- well above fair market value in order to capture their referrals and subsequent "downstream" revenue. That includes annual compensation of $1.2 million each for an ob/gyn and two radiation oncologists and $780,000 plus nearly a quarter of the year off for a cardiologist. A pain specialist made $1.5 million 2 years in a row, and made more than $1 million in other years.

Those salaries exceeded fair market value and weren't commercially reasonable, DOJ alleged.

The hospital even paid some of those specialists knowing their practice would operate at a loss, which would be made up by that downstream revenue, according to the Longo and DOJ complaints. Violi and executives tracked referral volume and revenue generation of nearly all its physicians, the complaints state.

Longo says he raised questions about the arrangements with management, but his concerns weren't addressed. He was terminated in August 2015; the reason, he was told by Violi, was that the physicians "wouldn't work for you," implying that Longo wouldn't strike the deals needed to make the hospital profitable.

Longo filed his whistleblower lawsuit in December 2017, and Wheeling Hospital filed a countersuit in March 2019, claiming that Longo didn't raise red flags about financial practices during his time as a financial consultant to the hospital with Deloitte or when he was employed by the hospital. It also alleged that the claims were false and were made in order to receive a "quick monetary settlement." Wheeling also argued that it was paying competitive compensation to compete with facilities in Pittsburgh and Morgantown.

Within a week of the countersuit, the DOJ intervened in Longo's original suit, filing its own complaint alleging that since at least 2007, the hospital had been violating both the the Stark Law and the Anti-Kickback Statute with its physician compensation deals, and Medicare claims resulting from those arrangements violated the False Claims Act.

The hospital settled the charges last week, with its new CEO, Douglass Harrison, saying in a statement that it was "in the best interest of the long-term viability of the hospital and the community. Prolonging the lawsuit would have paralyzed the ability of the hospital to attract the best physicians and to make the necessary capital improvements to ensure that the highest quality healthcare continues to be provided in the Upper Ohio Valley."

Harrison's appointment was part of a management agreement with WVU Health System, and given that significant change, the DOJ settlement doesn't include a five-year monitoring agreement, and the hospital did not admit wrongdoing, according to the statement.

Wheeling certainly isn't the first hospital to get in trouble for overpaying physicians in order to secure their referral business. Last year, Beaumont Hospital in Michigan paid $85 million to settle charges that it gave doctors free or discounted offices and subsidized the cost of assistants in exchange for patient referrals. Kalispell Regional Healthcare System in Montana paid $24 million last year to settle claims that it overpaid 63 specialists in exchange for referrals.

Vikas Saini, MD, a cardiologist and president of the Lown Institute, a Massachusetts non-profit that champions affordable healthcare, said it's business as usual for hospitals to entice physicians with competitive deals in order to raise the bottom line, knowing decisions about treatments and tests rest with the physician.

"There are varying types of arrangements, with varying degrees of sophistication and varying degrees of compliance with rules and laws," said Saini. "It's absolutely true that many hospitals [make similar agreements with physicians], but maybe they don't go quite so far."

"There are many well-paid lawyers whose job it is to figure out what this hospital did, but in a way that passes legal muster," he said. "If you're complying with the letter of the law but violating the spirit of the law, what good is that? There is a soft creeping corruption in these arrangements all over the country."

Dealmaking of this type is symptomatic of profit-driven healthcare, Saini said: "We have a system in which hospitals really have to compete for revenue and high-margin business because we treat them like a normal business. But healthcare is not a normal economic activity. There is a fundamental disconnect here."