Investing.com -- A Southern California hospital agreed to pay more than $3.2 million on Friday to settle charges with the U.S. Department of Justice and the Office of the Inspector General that it violated the Stark Law and the False Claim Act by failing to comply with Medicare standards regarding a series of financial relationships it maintained with referring physicians.
The Stark Law, which was included as a provision in a 1989 federal omnibus budget act, prohibits physician referrals of designated health services for Medicare patients if the physician is entered in a financial relationship with that entity. For a period of four years through 2011, Tri-City Medical Center, a regional hospital in Oceanside, California, allegedly maintained a financial relationship with 97 physicians that did not comply with the Stark Law, the Justice Department alleged. In addition, the hospital identified 92 financial arrangements from 2009 to 2010 that were not in compliance with the law because the contracts between the parties either went missing, were unsigned or were expired, according to the Justice Department.
The settlement represents one of the largest ever for a hospital in the region.
"Patient referrals should be based on a physician’s medical judgment and a patient’s medical needs, not on a physician’s financial interests or a hospital’s business goals," said U. S. Attorney Laura E. Duffy of the Southern District of California. "This settlement reinforces that hospitals will face consequences when they enter into financial arrangements with physicians that do not comply with the law. We will continue to hold health care providers accountable when they shirk their legal responsibilities to the detriment of tax payer-funded health care programs."
The settlement resolves multiple technical violations and claims that certain physician contracts exceeded fair market value, the medical center said in a statement. The hospital also identified five arrangements with its former Chief of Staff of which the Justice Department alleged were not "commercially reasonable," according to the settlement. Tri-City Medical self-reported the violations to the Office of the Inspector General in July, 2011.
"It is unfortunate to have inherited this long-standing legal issue, but we are pleased to have brought it a successful conclusion," Tri-City Healthcare CEO Tim Moran said in a statement. "This is a clear indication that we must all strictly adhere to the guidelines set forth by all healthcare governing agencies."
Since 2009, the Justice Department has recovered more than $27.1 billion through False Claims Act cases, including more than $17.1 billion in cases involving fraud against federal health care programs.