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Scrutiny by the Federal Government of Hospital-Physician Financial Relationships Continues Unabated

On November 15, 2019, the Department of Justice (DOJ) announced a settlement in excess of $46 million with a number of California hospitals and affiliated medical practices. The basis for the action by the DOJ related to a variety of financial arrangements between the hospitals, and physicians and physician groups that are referral sources to the hospitals. DOJ alleged violations of both the Physician Self-Referral Law (Stark) and the Federal Anti-Kickback Statute (AKS).

In its press release, the DOJ stated:    

“Improper financial arrangements between hospitals and physicians can influence the type and amount of health care that is provided” and “The Department (DOJ) is committed to taking action to eliminate improper inducements that can impact physician decision-making.”

The DOJ cited violations of the Stark Law by the hospitals for billing Medicare for services referred by physicians, to whom the hospitals paid amounts under a series of compensation arrangements that exceeded the fair market value of the services provided. The DOJ also considered the leasing of office space at below-market rates to physicians and reimbursement for physician-recruitment expenses that exceeded the actual recruitment expenses incurred.

These are just a few of the impermissible arrangements cited by the DOJ. This enforcement action is clearly part of a recent trend by the DOJ to take action and levy significant recoupments and fines against hospitals and physicians that engage in suspect transactions.  

It is prudent for hospitals and physicians to have financial arrangements reviewed by qualified health law counsel to assure compliance with applicable federal and state law. Where previously consummated arrangements are found to be suspect, parties should take immediate corrective action, which may include restructuring of the arrangements to bring them into compliance, as well as exploring the remedial measure of “Self-Disclosure.”

Self-Disclosure protocols allow for negotiated settlements with federal and state agencies that can significantly mitigate financial penalties as well as avoid enforcement actions such as exclusion from participation in Medicare, Medicaid, Tricare, and other federal and state programs.

Frier Levitt has a multi-disciplinary team of attorneys focused on healthcare compliance and government defense. We have handled hundreds of federal investigations and settlements and has successfully negotiated dozens of Self-Disclosures with the Office of the Inspector General. Contact Frier Levitt today to discuss the process of regulatory evaluation of hospital-physician arrangements.