Health system to pay $9.3M settlement over improper doc pay

Freeman Health System yesterday agreed to pay $9.3 million to settle allegations that the Joplin, Mo., nonprofit hospital violated the Stark law and the False Claims Act by providing incentive pay to physicians based on how many referrals they supplied.

Discovered through a 2009 internal review, Freeman Health said it inadvertently made errors that structured its physician-compensation agreements in violation of the "very complex'' federal guidelines, system President Paula Baker told the Joplin Globe.

Freeman self-disclosed the errors to the government.

"We caught this on our own. Nobody but us found the problem, and we voluntarily disclosed it,'' Baker said.

Under the Stark law, hospitals are forbidden to bill Medicare for certain referrals for which the hospital offers financial incentives. The United States alleged Freeman Health knowingly compensated some of its physicians though a volume-based compensation system that provided incentive pay to 70 employed physicians based on the revenue generated by referrals.

"Today's resolution underscores our commitment to ensure that healthcare decisions are based on the best interests of patients rather than the personal financial interests of referring physicians," Acting Assistant Attorney General for the Department's Civil Division Stuart F. Delery said in a U.S. Department of Justice statement yesterday.

Acting U.S. Attorney for the Western District of Missouri David M. Ketchmark added, "These laws are intended to ensure that physicians make referrals for healthcare services based solely on the medical needs of their patients rather than any financial incentives."

The health system president asserted in the newspaper article that "all diagnostic testing or any other services or procedures ordered by Freeman physicians were clinically indicated and necessary" and patients won't see a difference in their out-of-pocket costs as a result.

Under the False Claims Act, the Justice Department has recovered $10.1 billion in healthcare fraud cases since January 2009, it said.

For more information:
- see the DoJ statement
- read the Joplin Globe article

Related Articles:
Whistleblower accuses hospital of overpaying docs $5M
How to self-disclose Stark, kickback violations
Memorial Health Care to pay $1M for alleged patient referral violations
Atlantic Health System to pay $9M for alleged Medicare overbilling
Federal appeals court overturns $45M Stark ruling
OIG to change provider self-disclosure protocol