$85 Million Settlement in Stark Law Whistleblower Case, Relator to Receive $20.8 Million

The federal Stark Law is designed to place limitations on physician referrals and to create greater patient confidence in the underlying rationale for a patient referral. Prior to the Stark Law, there were no regulations in place regarding referrals by a physician to laboratories or hospitals in which the physician has a financial stake. Over time, it became apparent that doctors were routinely referring patients to places for medical services in order to obtain additional profits – and not because the particular referral was in the patient’s best interests. The Stark Law worked to change this unethical “taint” on patient referrals by prohibiting doctors from sending a patient to any health services entity with which he has a financial relationship or interest. If a physician violates this rule and either party subsequently submits an invoice for reimbursement to a federal healthcare program (e.g., Medicare, Medicaid, Tricare, etc.), the claim will be denied and liability could ensue.

In today’s case, we examine an $85 million settlement involving Florida-based Halifax Health. The case began with a whistleblower report and blossomed into one of the largest single false claims settlements in history under the Stark Law. Of course, False Claims Act cases often settle for much more than this, allowing whistleblowers to take home a sizable reward of up to 30 percent.

Details of Case Against Halifax Hospital

The whistleblower lawsuit against Halifax began in 2009 when qui tam plaintiff and then-current employee, Elin Baklid-Kunz, filed her lawsuit under the False Claims Act. The suit alleged, among other things, that an unlawful financial relationship existed between several neurosurgeons and oncologists and to Halifax Hospital. More specifically, six oncologists entered into an agreement with Halifax wherein an “incentive bonus” would be offered pursuant to the following:

“Beginning with the fiscal year ending September 30, 2005, an equitable portion of an Incentive Compensation pool which is equal to 15% of the operating margin for the Medical Oncology program as defined by the financial statements produced by the Finance Department on a quarterly basis. The amount of the incentive compensation distributed to the Employee shall be determined by the Medical Oncology Practice Management Group. This compensation shall be paid annually according to the operating margin for the fiscal year….”

In other words, the non-profit hospital was offering an incentive to certain doctors based on certain “financial statements” — thereby allowing these doctors to receive a portion of the profit margin for the medical oncology program. The relator quickly recognized the financial relationship between these several doctors and Halifax and revealed to investigators that thousands of Medicare patient referrals were made by these doctors to Halifax — a textbook example of the kind of activity prohibited by the Stark Law.

Despite these relationships, according to the complaint, these doctors still made referrals to Halifax. At the time of the alleged scheme, Baklid-Kunz was employed as the director of physician services and opted to share her concerns with members of the executive board and compliance officers – none of whom took steps to put a stop to the referral agreements. From there, she filed her whistleblower complaint and the U.S. government partially intervened in 2011 with regard to the Stark Law violations only.

According to the allegations, several oncologists and neurosurgeons were paid fees by the hospital which were above fair market value, were not commercially reasonable, and were based on the volume of patient referrals – all practices prohibited by the FCA and Stark Law. The hospital is alleged to have purposely sought out Medicare patients for referrals, making each referral and subsequent claim for reimbursement a false claim subject to triple damages. According to reports, this case involves over 27,000 illegal payments from 2001 through 2011.

These arrangements continued for such an extended length of time, the District Court opted to sever the case into two separate trials. The first, which was scheduled for jury selection earlier this week, was to deal solely with the issues arising under the FCA and Stark Law. In order to alleviate itself from massive potential liability, the hospital opted to settle that portion of the case. The whistleblower, who is still employed with Halifax, is slated to collect close to $13 million for her efforts. The second phase, which deals with allegations of unnecessary patient care and upcoding, is scheduled to begin later this summer.

Contact a Whistleblower Attorney Today

The case against Halifax involves a steadfast and dedicated plaintiff who, after not receiving results from the internal compliance structure, opted to exercise her rights under the FCA to bring false claims to light. If you work in the healthcare industry or are otherwise aware of possible healthcare fraud, we encourage you to contact us today for a consultation and review of your claim.