Sutter Health settlement over Stark Law violation accusation tops $46M

Sutter Health Building
Department of Justice officials announced several Sutter hospitals ran afoul of the Physician Self‑Referral Law, commonly known as the Stark Law, which prohibits a hospital from billing Medicare for certain services referred by physicians with whom the hospital has a financial relationship. (Sutter Health)

Sutter Health will pay more than $46 million to settle Stark Law violations. 

Department of Justice (DOJ) officials announced several Sutter hospitals ran afoul of the Physician Self‑Referral Law, commonly known as the Stark Law, which prohibits a hospital from billing Medicare for certain services referred by physicians with whom the hospital has a financial relationship. 

Among the settlements is a $30.5 million payment to resolve allegations that Sutter Memorial Center Sacramento violated the Stark Law between 2012 and 2014 for services referred by Sacramento Cardiovascular Surgeons Medical Group (Sac Cardio) physicians. Officials say Sutter paid Sac Cardio doctors amounts under a series of compensation arrangements that exceeded the fair market value of the services provided.

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Sac Cardio has also agreed to pay more than $500,000 to resolve allegations that it knowingly submitted duplicative bills to Medicare for services performed by physician assistants that it was leasing to Sutter under one of those compensation arrangements.

RELATED: Sutter Health agrees to pay $30M to settle accusations of inflated MA 'risk scores'

“Improper financial arrangements between hospitals and physicians can influence the type and amount of health care that is provided,” said Assistant Attorney General Jody Hunt of the DOJ’s Civil Division in a statement. “The Department is committed to taking action to eliminate improper inducements that can impact physician decision-making.”

Sutter also agreed to pay more than $15.1 million to resolve other conduct it self disclosed regarding additional Stark Law violations.

According to the DOJ, Sutter hospitals submitted Medicare claims that resulted from referrals by physicians to whom those hospitals paid compensation under personal services arrangements that exceeded the fair market value of the services provided, leased office space at below-market rates and reimbursed physician recruitment expenses that exceeded the actual recruitment expenses at issue. 

Additionally, several Sutter ambulatory surgical centers allegedly double billed the Medicare program by submitting claims that included radiological services for which Medicare separately paid another entity that had performed those services, the DOJ said.

The claims brought against Sutter and Sac Cardio were originally brought by Laurie Hanvey in a lawsuit filed under the whistleblower provisions of the False Claims Act. As a whistleblower, she will receive nearly $5.9 million of the federal government’s recovery in the case. 

DOJ officials said the claims resolved by the settlements are allegations only and there was no determination of liability.

"This settlement was not based upon any alleged payment for referrals and there was no finding that Sutter violated the anti-kickback laws," a Sutter Health spokeswoman said in a statement. "Any assertion that the settlement was based upon a finding of payments for referrals is completely inaccurate and Sutter denies any such conduct."

Officials said Hanvey was working with Sutter on the process of remediating the issues when "she elected to file her lawsuit under seal."

"Since the date of the 2010 self-disclosure, Sutter has invested significant resources into enhancing its compliance program and will continue to do so in its ongoing efforts toward assuring absolute compliance with all applicable laws and regulations," the statement said.

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