Health systems cough up stiff settlements for overpaying docs

Two health systems are facing multi-million dollar settlements following allegations that they violated federal law by overcompensating physicians, sometimes offering packages of more than $1 million in an effort to induce referrals.

Whistleblower attorneys at Phillips & Cohen LLP announced Monday that Adventist Health System agreed to pay $118.7 million to settle claims brought by three former employees alleging the hospital provided excessive payments to physicians in Florida, as well as North Carolina, Tennessee and Texas.

The plaintiffs claimed that Adventist convinced physician practices to join the system, thereby increasing inpatient referrals, by providing inflated base salaries and extravagant bonuses. Although physician practices frequently lost as much as $6 million annually, Adventist balanced the losses by tracking a "contribution margin" or revenue from inpatient referrals. For example, one pediatric urologist allegedly received $300,000 annually for working three days each month because the agreement would provide "substantial referrals."

A announcement from Phillips & Cohen indicated that the settlement was the largest healthcare fraud settlement involving physician compensation agreements.

The Adventist settlement was nearly twice as much as one that was finalized last week by another South Florida health system. After it was reported last month that North Broward Hospital District would settle false claims allegations that it paid kickbacks to physicians, the health system, which operates facilities in Broward County, Florida, finalized the settlement for $69.5 million, according to the U.S. Attorney's Office for the Southern District of Florida. The hospital district allegedly provided exceedingly high compensation to nine physicians in an effort to increase patient referrals.

The plaintiffs claimed that the hospital assigned physicians a sham title of "medical director" in order to boost payments, according to the Sun Sentinel. Some agreements included salaries of more than $1.6 million.  

The hospital denied wrongdoing, and David Di Pietro, a board chairman for the hospital, told the Sun Sentinel that no physician currently makes more than $860,000. He added that medical director titles were misconstrued because of "technical problems," involving inaccurate time logs, rather than outright fraud.

Physician compensation agreements have been on the radar of federal prosecutors and enforcement agencies. Earlier this year, the Office of Inspector General released a fraud alert addressing physician compensation agreements that go above fair market value, and specifically medical directorships that pay for services the physician did not provide. This enforcement area has led some hospitals to place more focus on corporate compliance programs.

For more:
- here's the Adventist Health lawsuit and settlement
- see the Phillips & Cohen announcement
- here's the Broward Health announcement
- read the Sun Sentinel article

Related Articles:
As fraud crackdown grows, so does need for corporate compliance
OIG fraud alert targets physician compensation agreements
Citing fraud concerns, Florida governor orders regulators to audit 129 hospitals
Amid increased federal enforcement, compliance guidelines offer foundation for fraud prevention

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