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Detroit Hospital System to Settle FCA Kickback Allegations for $84.5 Million

The U.S. Department of Justice ("DOJ") announced on August 2, 2018, that Beaumont Health ("Beaumont"), a Detroit area hospital system, has agreed to an $84.5 million settlement to resolve a case setting forth False Claims Act ("FCA") allegations that it defrauded Medicare, Medicaid, and Tricare by paying kickbacks to physicians in return for false billing claims and patient referrals.

According to the settlement, Beaumont will pay $82.74 million to the federal government, as well as $1.76 million to the State of Michigan. The hospital system also entered into a five-year corporate integrity agreement ("CIA") with the U.S. Department of Health and Human Services' Office of Inspector General, which includes a stipulation for a review of its referral arrangements by an independent review organization.

The Acting Assistant Attorney General of the DOJ's Civil Division commented that "Offering financial incentives to physicians in return for patient referrals undermines the integrity of our health care system...Patients deserve the unfettered, independent judgment of their health care professionals."

The settlement is a result of four different cases brought against Beaumont, one in 2010 and three in 2011. The four whistleblowers alleged that the hospital system violated the Anti-Kickback Statute and Stark Law from 2004 to 2012 by rewarding physicians for patient referrals with excessive pay and inexpensive or free office space. Beaumont is also accused of misrepresenting to the government that a radiology center was part of its outpatient department, a further violation of the FCA.

The first whistleblower learned of the kickback scheme in 2005 while working as the vice president of research for the hospital system. The whistleblower was deeply troubled by the discovery, and in a statement commented that "[i]f someone demonstrates a lack of integrity in their financial dealings, why should I believe that they will show integrity in clinical practice or research?" The four whistleblowers are set to receive between 15 and 25 percent of the recovery.

Beaumont's president and CEO stated that "[t]he resolution of these matters, some of which go back to contracts originating 14 year ago, reflects Beaumont Health's commitment to the future of health care in Southeastern Michigan. Since the formation of Beaumont Health in 2014, the new management team has implemented additional compliance and legal review processes to ensure our effective compliance with the complex regulations applicable to health systems and to provide additional assurance that these types of issues do not arise again."

Beaumont Health was formed in 2014 with the merger of Beaumont Health Systems, the organization the hospitals involved in the case were originally part of, and two other health systems. The merger occurred as a result of the efforts to correct the allegations against the hospital system, and Beaumont emphasized that none of the allegations against them involved the accuracy of patient billing or quality of patient care.

The U.S. Attorney for the Eastern District of Michigan praised the hospital system's new leadership for "making things right once its past wrongdoing was brought to its attention."

The settlement is one of the largest ever against a Michigan hospital. Counsel for one of the whistleblowers commented that "[i]t sends an unmistakable message that health care fraud and abuse will not be tolerated in Michigan hospitals," and added that because of the settlement and regulations outlined in the CIA, "Michigan patients and taxpayers are going to be better protected."

The legal team at Shepherd, Finkelman, Miller & Shah, LLP ("SFMS") has significant experience litigating qui tam and false claims matters. If you have any questions regarding this subject or this posting, please contact Nick Lussier ([email protected]) or Chiharu Sekino ([email protected]). We can also be reached toll-free at (866) 540-5505.

SFMS is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, and Pennsylvania. SFMS is an active member of Integrated Advisory Group (www.iaginternational.org), which provides us with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe. For more information about our firm, please visit us at www.sfmslaw.com.

Sources

Smith, Danielle Nichole. "Hospital System Will Pay $84.5M To End FCA Kickback Claims." Law 360. Last modified on August 2, 2018.

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