Memorial To Pay $1,278,579 After Federal Probe Of Financial Arrangement With Doctors; Memorial Says It Found Problem And Quickly Corrected It

Thursday, August 23, 2012

U.S. Attorney Bill Killian announced Thursday that his office has reached a settlement with Memorial Health Care System, Inc.  and Memorial Hixson Hospital (formerly known as Memorial North Park Hospital) in which Memorial agrees to pay $1,278,579 to settle alleged violations of the federal False Claims Act and other federal laws and regulations.

Memorial officials said the hospital found problems with leases with certain doctors in 2009, self-reported the problems, and corrected them. 

        The settlement agreement alleges that, beginning as early as January 2003, Memorial entered into a series of financial arrangements with certain physicians and physician groups through which it provided financial benefits intended to induce physicians to refer patients to Memorial facilities.  These arrangements violated federal laws known as the Ethics in Patients Referrals Act (or the “Stark law”) and the Anti-Kickback Statute and resulted in the submission of false claims to the Medicare system, U.S. Attorney Killian said.

He said these laws "are intended to protect patients by ensuring that physicians make patient referral decisions based on the patients’ best interests without being influenced by payments or financial benefits received from hospitals competing for their business. In addition, these laws are designed to protect the integrity of government-funded health care benefit programs.  Federal law prohibits hospitals from submitting claims to government-funded health care benefit programs such as Medicare for inpatient and outpatient hospital services referred, ordered, or arranged for by physicians who have prohibited financial arrangements with those hospitals.

        “Health care fraud and abuse has been and continues to be a major point of emphasis for the Justice Department and this Office. We will continue to enforce the Ethics in PatientReferrals Act and to protect the Medicare trust fund.”

        U.S. Attorney Killian noted that this settlement resulted from a comprehensive investigation that began in early 2009 and was a joint effort of the U.S. Attorney’s Office for the Eastern District of Tennessee, the U.S. Department of Justice; and the Department of Health and Human Services - Office of Inspector General (HHS-OIG). 

After the investigation began, but before being specifically notified of it, Memorial contacted government officials to report that it had discovered potential Stark law and anti-kickback statute violations.  Soon afterward, Memorial learned of and began cooperating with the government’s investigation.  Memorial has denied any intentional wrongdoing in agreeing to the settlement.  The investigation did not involve or reveal patient quality of care concerns, it was stated.

"This is an excellent example of how a health care provider can self-report billing concerns to the Government and avoid costly false claims litigation," said Derrick L. Jackson, Special Agent in Charge at the HHS-OIG in Atlanta.  “The OIG welcomes the opportunity to work with providers to resolve issues such as this and return money back to the Medicare Trust Fund."

        U.S. Attorney Killian commended the cooperative efforts of all who played a role in this complex investigation, and in particular lead HHS-OIG Special Agent Bob Turner and AUSAs Rob McConkey and Betsy Tonkin. He also expressed appreciation for the assistance of DOJ Senior Counsel Laurie Oberembt and HHS-OIG Senior Counsel Katie Fink. 

 Memorial issued this statement:

Memorial HealthCare System (Memorial) has signed a settlement agreement with the federal government, which resolves issues Memorial had previously self-disclosed involving certain leases with several physicians and physician groups who practiced at Memorial.

As part of its routine review of leases and contracts, Memorial discovered that prior to 2009 it had lease arrangements with physicians and physician groups that may have been out of compliance with the federal Stark law.  Memorial officials self-reported their findings to the federal government in December 2009 and at the same time corrected the lease arrangements.

Memorial reached the agreement without admitting liability in order to avoid the expense and uncertainty of litigation.  Additionally, Memorial does not believe that its lease arrangements were intended to induce physicians or physician members of groups to refer patients to Memorial facilities, which would be a violation of the anti-kickback statute.

As part of the settlement agreement, Memorial will pay the federal government $1.28 million.

James M. Hobson, Memorial president and CEO, said, “Upon evaluating the lease arrangements in 2009 as part of our compliance program, we determined that they did not reflect the true market value of office space leased to physicians or physician groups as the law requires.  We immediately self-reported our discovery to the U.S. Attorney for the Eastern District of Tennessee and brought the leases into compliance.

“Our mission is to serve our community with integrity, compassion, and excellence.  We found a problem, we quickly self-disclosed it to the appropriate authorities, we corrected the situation and we cooperated fully with the subsequent U.S. Attorney’s inquiry.  We will continue our practice of regularly evaluating and monitoring all our business practices to ensure legal and regulatory compliance.”


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