A federal False Claims Act lawsuit was recently settled with Adventist Health System and its affiliated hospital, White Memorial Medical Center. The qui tam suit, which contains allegations that Adventist Health paid illegal kickbacks, was originally filed by two Los Angeles physicians. According to the Department of Justice (DOJ), Adventist Health agreed to pay the United States government and the state of California $14.1 million in order to resolve the allegations.
The False Claims Act lawsuit stemmed from a whistleblower complaint that was filed during 2008. According to court documents, Adventist Health allegedly violated the False Claims Act by compensating certain physicians with illegal kickbacks in exchange for referring patients to White Memorial Medical Center. After learning of the hospital’s illegal actions, two internal-medicine physicians, Dr. Hector Luque and Dr. Alejandro Gonzalez, consulted with a False Claims Act attorney and filed a complaint against the hospital.
“Kickbacks and other unlawful financial arrangements cost taxpayer dollars and undermine the integrity of medical judgments,” said Stuart F. Delery, the Acting Assistant Attorney General for the Civil Division. “The Department of Justice is committed to making sure that physician referrals do not involve payments made in violation of federal law.”
About Adventist Health System
Adventist Health System is headquartered in Roseville, California. The company operates 19 hospitals and 150 clinics located in the states of California, Oregon, Washington and Hawaii. White Memorial Medical Center is one of Adventist Health’s affiliate hospitals and is located in downtown Los Angeles.
As one of the area’s largest teaching hospitals, White Memorial is a 354-bed full-service medical center. It is staffed by approximately 433 doctors and an additional 1,504 employees. Founded by the Seventh-day Adventist Church, White Memorial is one of the largest non-profit hospitals in the country.
Details of the False Claims Act Lawsuit
According to the DOJ, Adventist Health violated both the Anti-Kickback Act and the Stark Law, and by extension, the False Claims Act. These laws prohibit any financial relationships between hospitals and physicians who refer patients to their facilities. The Anti-Kickback Act Prohibits the payment, enticement and reward of patient referrals, along with the generation of Federal Healthcare program business. The Stark Law prohibits a physician from referring Medicare patients for certain health services to any business or entity with which the doctor has a financial relationship.
Adventist Health allegedly provided illegal kickbacks to physicians who referred patients to White Memorial. Kickbacks were provided in the form of salary overpayments to select doctors who provided teaching services. For example, several physicians were paid a much higher fee to instruct classes at White Memorial’s family practice residency program. Additional kickbacks were provided through the transfer of assets at less than fair market price. For instance, Adventist Health allegedly sold medical and non-medical supplies to certain referring physicians at a greatly reduced price. The qui tam lawsuit also alleged Adventist Health provided illegal kickbacks to referring physicians through extended lines of credit which were never paid back.
According to the qui tam lawsuit, the whistleblowers also alleged that White Memorial paid for travel and other various expenses that referring doctors incurred as a means to recruit and entice additional physicians to their hospitals.
“Payouts made by hospitals and clinics – as the government alleged in this case – raise substantial concerns about physician independence and objectivity,” said Ivan Negroni, Special Agent in Charge of the Office of Inspector General, U.S. Department of Health and Human Services San Francisco region. “Taxpayers and vulnerable patients rightfully expect such payments to be investigated and pursued.”
For their part in the False Claims Act lawsuit, whistleblowers Dr. Hector Luque and Dr. Alejandro Gonzalez will receive $2.8 million of the government’s $14.1 million settlement, representing a whistleblowers’ or “relators’ share” of approximately 19%.
Around $11.5 million of the settlement will go directly to the United States government, while the rest will go to California’s Department of Health Care Services.
“The settlement announced today underscores one of the key purposes of the Stark and Anti-Kickback laws – to ensure that the judgment exercised by healthcare providers is based on legitimate patient needs and is not influenced by illegal payments,” said Benjamin B. Wagner, U.S. Attorney for the Eastern District of California.