The Department of Justice announced its latest healthcare fraud settlement involving Georgia-based Family Dermatology, P.C. According to the April 21, 2015, settlement, the practice was allegedly engaging in kickback schemes and improper financial arrangements between itself and several physicians in the local area. The company owns not only a dermapathology laboratory specializing in diagnostic testing, but several dermatology clinics throughout the Southeastern United States. In total, the company agreed to pay $3,247,835 plus interest to settle claims alleging that it unlawfully enticed physicians to refer and send patients exclusively to practices within the Family Dermatology network – a practice which is considered unlawful under both the False Claims Act and the Stark Law.
The case was originally brought to light by three separate whistleblower lawsuits, two of which were brought by physicians involved with the dermatology practice field. In total, the whistleblowers are expected to split $584,000 in exchange for their willingness to come forward.
Details of the kickback scheme involving Family Dermatology, P.C.
According to the details of the government’s press release, Family Dermatology employs the unique practice of hiring and retaining dermatologists as independent contractors, as opposed to full-time employees. Accordingly, the company required its contractors to utilize the in-house pathology lab for diagnostic testing of skin samples, known as Nelson Dermatopathology. Under the government’s analysis of both the False Claims Act and the Stark Law, requiring the contractors to solely utilize Nelson Dermatopathology, as opposed to any other diagnostic clinic, amounted to an improper financial relationship and a violation of the illegal kickback rules applicable to Medicare and Medicaid enrollees. Moreover, the government contends that this practice unnecessarily raises the costs of healthcare for everyone by resulting in inflated costs for diagnostic services and eliminating the market competition.
Government’s response to the settlement
As we have previously reported, the government has worked tirelessly to combat the swelling trend of healthcare fraud in the United States. The DOJ said in a statement:
“The Department of Justice has had longstanding concerns about improper financial relationships between healthcare providers and their referral sources, because such relationships can alter a physician’s judgment about the patient’s true health care needs and drive up health care costs for everybody…. In addition to yielding a recovery for taxpayers, this settlement should deter similar conduct in the future and help make health care more affordable.”
Likewise, the U.S. Attorney’s Office for the Middle District of Florida commented:
“Physician self-referrals that violate the Stark Statute undermine medical decision making, jeopardize patient care, and cost the taxpayers money…. Patients need to have confidence that the advice they receive from their physicians is based on sound medical practice, not illegal financial relationships between providers. We will continue to investigate and pursue these types of violations in our district.”
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