UPMC pays $38M to settle 12-year-old whistleblower case

UPMC is putting a 12-year-old False Claims Act suit to bed with a $38 million settlement payment.

The deal, announced last week by lawyers for the plaintiff whistleblowers, relates to claims that UPMC had arrangements with neurosurgeons to refer procedures and surgeries to the nonprofit hospital system. Claims for those services were then submitted for reimbursement from Medicare in violation of the Stark Law, the plaintiffs alleged.

“Patients need and deserve to know that the hospital services they receive are the product of sound medical judgment, rather than motivated by the physician’s financial interests,” said Steve Del Sole of Del Sole Cavanaugh Stroyd, one of the law firms representing the plaintiffs, in a statement.

UPMC agreed to the settlement payment but does not admit to any wrongdoing. Thirteen other staff neurosurgeons had also been listed as defendants.

The lawsuit had been filed back in 2012 by J. William Bookwalter, M.D., a neurosurgeon; Robert Sclabassi, M.D., a neurophysiologist; and Anna Mitina, a surgical technologist.

The plaintiffs alleged that UPMC was incentivizing neurosurgeons to perform their procedures at its facilities in order to secure higher revenues from the government and would reward those physicians with “well-above fair market value” compensation. In court filings, UPMC countered the compensation packages and productivity bonuses it offered were industry standard.

In 2016, the government settled a portion of the claims related to certain physician services claims for $2.5 million following an investigation by federal officials but declined to intervene on the remaining allegations.

The plaintiffs continued to pursue their claims, at one point in 2019 winning an appeal after a district court had previously dismissed the case. That appellate court ruled that “a hospital’s compensation plan that overpaid its doctors could violate the Stark Law if that compensation varied with or took into account the volume or value of referrals,” per the plaintiffs’ lawyers.

The whistleblowers will receive 29%, or just over $11 million, of the $38 million settlement. Del Sole Cavanaugh Stroyd and the other firms—Stone Law Firm, Simpson Law Firm and Morgan Verkamp—said they believe the payout to be among the largest Stark Law recoveries in a case where the government declined to intervene.

“This kind of recovery would simply be impossible without the bravery and commitment of whistleblowers willing to incur enormous risk to do the right thing on behalf of the taxpayers,” Andrew Stone of Stone Law Firm said in a statement.

In an emailed statement, UPMC Vice President and Chief Communications Officer Paul Wood said the system “is pleased to have resolved this matter, twelve years after it first started. The settlement, which includes no admission of liability, allows UPMC to keep its focus where it belongs—on providing world-class care to our patients.”

Pittsburgh-based UPMC is an integrated health system and currently one of Pennsylvania’s largest employers. Its provider, insurance and other business arms logged $27.7 billion of revenue across 2023.

Last year, the organization came to an $8.5 million settlement with the government over another whistleblower case involving its then-chair of cardiothoracic surgery, who was said to have been fraudulently billing for, and performing, simultaneous surgeries. That deal came with promises to create a Corrective Action Plan for the doctor and a one-year audit of his physician fee service billings to Medicare.