Texas Hospital Group Pays U.S. $27.5 Million to Settle False Claims Act Allegations

A hospital group based in McAllen, Texas, has agreed to pay the United States $27.5 million to settle claims that it violated the False Claims Act, the Anti-Kickback Statute and the Stark Statute between 1999 and 2006, by paying illegal compensation to doctors in order to induce them to refer patients to hospitals within the group, the United States Justice Department announced today. McAllen Hospitals L.P., d/b/a/ South Texas Health System, is a subsidiary of Universal Health Services Inc., a company based in Pennsylvania that owns hospitals and other health care centers around the country.

The settlement announced today involved allegations that the defendants had entered into financial relationships with several doctors in McAllen in order to induce them to refer patients to the defendants’ hospitals. The government alleged that these payments were disguised through a series of sham contracts, including medical directorships and lease agreements. Under the Stark Statute, Medicare providers are prohibited from billing Medicare for referrals from doctors with whom the providers have a financial relationship, unless that relationship falls within certain exceptions.

The settlement resolves allegations raised against both the parent and the subsidiary in a qui tamor whistleblower lawsuit filed in 2005 by Bruce Moilan, a former employee of the defendants, United States ex rel. Moilan v. McAllen Hospitals, L.P., et al., Case No. M-05-CV-263 (S.D. Tex.).

Violations of the federal Anti-Kickback Statute, 42 U.S.C. Section 1320a-7b(b), have served as the basis for many whistleblower (or “Qui Tam”)  cases under the federal False Claims Act.  The Anti-Kickback Statute, and a number of similar State laws, generally prohibit anyone from offering, paying, soliciting or receiving any remuneration to induce (or reward) a referral of a person for services or items paid for by Medicare, Medicaid, another federal healthcare program.  These improper payments can come in many different forms, including, but not limited to: referral fees; finder’s fees; productivity bonuses; discounted leases; discounted equipment rentals; research grants; speaker’s fees; excessive compensation; and free or discounted travel or entertainment.

For more information: http://www.justice.gov/opa/pr/2009/October/09-civ-1175.html