Recent Anti-Kickback Settlements Continue to Generate Substantial Revenue for DOJ

The United States Department of Justice recently settled three FCA lawsuits involving alleged violations of the AKS, which prohibits the offering, solicitation, or acceptance of any type of gift or remuneration in exchange for physician referrals for services covered by federally funded healthcare programs. The three settlements–all announced in March–totaled more than $35 million and involved whistleblower allegations of improper financial arrangements with physicians.

DOJ has continuously emphasized the importance of the AKS in fighting healthcare fraud, particularly in the context of physician compensation. “Investment arrangements that are structured to improperly compensate physicians for referrals can encourage physicians to make decisions based on financial gain rather than the best interest of their patients,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “The Department of Justice is committed to preventing illegal inducements, in whatever form, that undermine the integrity of our public health programs.” As described below, the recent qui tam settlements solidify DOJ’s focus on the AKS and improper inducements.

Tullio Emanuele v. Medicor Associates, Inc. et al., Civil Action No. 10-cv-00245 (W.D. Pa.)

• $20.75 million settlement.
• Defendants included UPMC Hamot, a Pennsylvania hospital, and Medicor Associates Inc., a regional cardiology practice. 
• UPMC Hamot allegedly paid Medicor as much as $2 million in return for patient referrals between 1999 and 2010. 
• The whistleblower alleged that UPMC Hamot identified physicians that referred a high volume of patients and/or had potential to refer a high volume of patients for special treatment and offered remuneration to them in the guise of twelve sham contracts for medical directorships or other similar personal service arrangements.
• These arrangements allegedly failed to meet a safe harbor because they were for unnecessary services, involved services that were duplicative or not actually performed, and grossly overcompensated the physicians for their purported services. 
• The whistleblower also alleged that he was asked to sign time records for work that bore no relation to any actual work performed. 

United States of America, et al. v. SightLine Health LLC, et al., Civil Action No. 16-cv-3202 (N.D. Tex.)

• $11.5 million settlement.
• SightLine develops radiation oncology clinics across the US.
• The whistleblower alleged that SightLine recruited urologists and other physicians to invest in the development and construction of radiation therapy centers with the intent of allowing physician-investors to profit from referrals to SightLine’s clinics. 
• The referring physicians allegedly invested in a series of leasing companies formed by SightLine, and through those companies, received distributions of profits generated from cancer patient referrals.
• The alleged conduct raised concerns that the investor-physicians’ financial investment assured a pipeline of referrals to the clinic–the investor physicians were referring patients for expensive radiation therapy more often than equivalent or better, cheaper therapies because of their financial interest in the treatment.

United States of America ex. rel. et al. v. George Bone & Joint, LLC et al., Civil Action No. 13-cv-00067 (N.D. Ga.)

• $3.2 million settlement.
• Defendants included a group of five orthopaedic and anesthesia provider organizations.
• A whistleblower–a former practice administrator–alleged that Summit Orthopaedic Surgery Center entered into an improper arrangement with a physician to induce the physician to refer his patients to Summit. 
• Pursuant to the alleged arrangement, the physician received a “site of service fee” for every patient he referred to Summit for an epidural steroid injection to compensate the physician for the reduced professional fee he would personally receive by performing the service at Summit, rather than his own office.

Impact on Financial Arrangements with Physicians

Given the success of these cases, DOJ will most assuredly continue to pursue AKS claims as a means of FCA enforcement in the healthcare realm. To minimize the risk of an AKS violation or a whistleblower claim, it is critical that healthcare providers consult with legal counsel before entering into any financial arrangements with physicians. Counsel can assist in ensuring that terms of arrangements adhere to statutory requirements and safe harbors, and that appropriate safeguards are in place for maintaining compliance with the AKS.