Ohio-Area Memorial Hospital to Pay $8.5 Million for False Claims Act Violations

Memorial Hospital, located in Fremont, Ohio, is a non-profit organization allegedly involved in improper billing practices for services provided to Medicare and Medicaid patients. It has also recently resolved allegations under the Stark Law involving unlawful financial relationships with other entities in the medical field. All in all, Memorial has agreed to pay $8.5 million to settle its claims; however, it has admitted no wrongdoing on either issue.

Facts of the Case Against Memorial

The False Claims Act prohibits doctors and hospitals from submitting claims to Medicare or Medicaid for reimbursement for services that either did not take place or should have been billed at a lower rate. The federal Stark Law is a separate but related statute that prohibits doctors from referring patients to specialists, hospitals, or other medical facilities in which the doctor has a financial interest in exchange for money or financial gain. Many times, these improper arrangements are handled under both the False Claims Act and the Stark Law, as the referral can also be seen as an improper kickback, violating both statutes when occurring within the context of a Medicaid or Medicare claim.

The case against Memorial involves improper financial relationships between it and two physicians. The first alleged a joint venture between Memorial hospital and a pain management specialist. While the details of the DOJ’s press release do not specifically describe the joint venture arrangement, a common scenario usually involves one medical entity granting equity in the business to a physician or group of physicians. This arrangement is generally allowable if the investing party pays fair market value for the equity purchase. However, Stark Law issues arise when equity is given in exchange for meeting patient quotas or offering equity for extremely reduced consideration.

The second allegation against Memorial involves an ophthalmologist who made purchases of costly intraocular lenses and thereafter sold the lenses to Memorial at inflated prices. The subsequent submission of any costs for these lenses to Medicaid or Medicare violates the False Claims Act and amounts to an improper request for reimbursement. The FCA requires physicians, hospitals, and specialists to bill for services at fair market value and any intentional inflations are grounds for penalty and liability.

Government’s Response

Pursuant to its settlement agreement, Memorial paid $8.5 million, $600,830 of which was given to the state of Ohio as a reimbursement for its portion of Medicare and Medicaid benefits paid. The amount paid to the whistleblower was not revealed by the DOJ at the time of the settlement. However, whistleblowers under the FCA stand to receive as much as 30 percent of the total settlement or verdict. As assistant U.S. Attorney for the Northern District of Ohio reiterated:

“Physician referrals should be made exclusively based on what’s best for the patient, not on financial relationships….We hope that this settlement will once again help drive that message home.”

The Department of Justice further commented by stating that:

“[i]mproper financial relationships between healthcare providers and their referral sources can undermine physicians’ judgment about patients’ true health care needs and drive up healthcare costs for everyone….The Justice Department is firmly committed to recovering the taxpayer dollars lost due to these arrangements and making sure that all healthcare providers follow the rules.”

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