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Department of Justice Enters Into Record-Breaking Stark Law Settlement

The U.S. Department of Justice (DOJ), and a handful of states, recently reached a settlement agreement with Adventist Health System (Adventist), resolving Stark Law issues, as well as allegations in two separate qui tam actions that included false claims. Generally speaking, the Stark Law limits physician referrals of designated health services or “DHS” for Medicare and Medicaid patients in instances where the physician - or an immediate family member of the physician - has a financial relationship with the DHS entity. 

The Adventist settlement is for a record breaking $115 million. Adventist, which operates 44 hospitals throughout 10 states, will also pay a total of $3.7 million to Florida, North Carolina, Tennessee and Texas. The announcement came just a week after the DOJ’s $69.5 million settlement with South Florida-based Broward Health in mid-September (based on allegations of upcoding and paying excessive compensation to a physician).

The allegations against Adventist included that compensation paid to physicians, mid-level practitioners, and physician assistants was above fair market value, and that this excess compensation was paid for part-time or non-productive work. In addition, the complaints alleged that physicians received perks, such as car payments, private office staff, equipment, and supplies without charge, and that Adventist tolerated known upcoding and overbilling by employees and contracted physicians.

Adventist did not admit any liability, nor was it required to enter into a Corporate Integrity Agreement, as part of the settlement.

It is too early to tell whether the recent flurry of Stark Law settlements is a coincidence or a trend signaling an uptick in Stark Law enforcement by the DOJ. Moreover, these settlements are much larger than past Stark law self-disclosure settlements. It is not clear if settlement amounts will continue to climb (even for technical violations) or if the mega settlements will be limited to cases where it appears that physicians were paid in excess of fair market value. Regardless, given the significant potential liability for violations of the law’s requirements, hospitals and health systems should be carefully scrutinizing all their financial arrangements with physicians. Foster Swift’s Health Care attorneys can assist in determining Stark compliance of any proposed transaction with physicians. For more information, please contact Gary J. McRay at gmcray@fosterswift.com or Nicole E. Stratton at nstratton@fosterswift.com.

Categories: Billing/Payment, Medicare/Medicaid, News & Events, Physicians

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Gary has nearly 40 years of experience and has earned a reputation for handling sophisticated transactions for hospitals, managed care organizations, HMOs, health insurers, physician groups and other provider entities and for helping his clients stay on top of complex regulatory issues, such as Anti-Kickback Statute, Stark II, Medicare, Medicaid, and BCBSM reimbursement appeals. 

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