Hospital System To Pay $85 Million Over Alleged False Claims Act Violations

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Halifax Health of Daytona Beach, Florida, announced an $85 million settlement just moments before the start of jury selection in a case involving conflict-of-interest regulations.

The settlement may resolve the first half of a trial involving Halifax Health’s physician compensation deals and determining if those deals violate laws over conflicts of interest, according to Modern Healthcare.

Halifax Health had been readying for the trial, which involved the largest potential civil whistle blower case damages against a single hospital. According to Modern Healthcare, about one billion dollars was at stake and Halifax Health was preparing to become one of just a few hospitals to ever reach trial in this type of a case. The case followed a similar 2013 case in which a $237 million judgment was found against a hospital in South Carolina over allegations of doctors being overpaid.

Halifax Health opted to settle the first half of the case out of court. That portion of the allegations included that hospital administration illegally compensated nine neurologists and medical oncologists for their referrals of Medicare patients to the hospital, Modern Healthcare reported. The parties agreed to a settlement-in-principle for $85 million, which must be approved or dismissed by U.S. District Judge Gregory Presnell. If this case is approved, the whistleblower will receive $20.8 million of the settlement.

Spokeswoman for Halifax Health, Berit Hallberg, said the settlement would not include admission of wrongdoing noting, “We still believe that we acted responsibly in our efforts to comply with the highly complex Stark law, but it is our fiduciary responsibility to avoid the risk associated with going to trial and the appeals.” She added, “We will not increase taxes to pay this settlement. The settlement will be paid over several years through belt-tightening and the potential delay of some capital expenses.” Coming to a settlement will also remove a large possible liability from Halifax Health’s ledgers, according to Modern Healthcare.

In 2009, a former compliance officer, who is still employed at Halifax in a different role, filed a whistleblower lawsuit that accused Halifax administrators of paying physicians increased rates and also paid bonuses for the most active physicians who used the hospital’s share of funds meant for Medicare. If the arrangement allegations are proven true, the arrangements would be a violation of the so-called Stark law and might also be a violation of the False Claims Act if they were found to have been done intentionally and with a reckless disregard for the law, according to Modern Healthcare. This could increase damages three-fold, costing hundreds of millions of dollars.

The Stark Law bans doctors from referring Medicare and Medicaid patients to those business entities with which they share a financial relationship. This includes a compensation arrangement.

When doctors are compensated in ways that differ from Medicare service volume or value, this may lead to a situation in which those physicians become incentivized to give unnecessary care or to make decisions that are not always in the best interests of the patient and which lead to increased profits. This is illegal. There are exceptions to the law, which Halifax claimed protected it from liability. A jury was being put together to decide that, Modern Healthcare explained, when the settlement for the first portion of the matter was announced. The Justice Department joined in those qui tam allegations against the hospital in 2011 and alleged violations of the False Claims Act, the Stark Law, and the federal Anti-Kickback Statute.

Even if this settlement is approved, Halifax must litigate the separate whistleblower allegations in July; the Justice Department did not join in this related case. In this second matter, the whistleblower alleged that Halifax ignored obvious signs that it billed Medicare for inpatient hospital care in cases in which medical need had not been documented. Halifax officials denied the allegations, according to Modern Healthcare.