Detroit hospital system to pay $85M in improper payment case

William Beaumont Hospital, a Detroit-area hospital system, will pay $84.5 million to settle allegations of violating the Anti-Kickback Statute for improper relationships with eight referring physicians.

The improper referrals resulted in the submission of false claims to Medicare, Medicaid and TRICARE, according to the U.S. Department of Justice (DOJ). The statute prohibits offering, paying, soliciting or receiving kickbacks to induce referrals of items or services covered by Medicare, Medicaid or other federally funded programs. The Stark Law also prevents a hospital from billing Medicare for certain services referred by physicians with an improper financial arrangement.

Between 2004 and 2012, Beaumont allegedly provided compensation substantially in excess of fair market value and free or below-fair market value office space and employees to certain physicians to secure their referrals of patients, according to DOJ. Beaumont also submitted claims for services provided to the illegally referred patients.

“Offering financial incentives to physicians in return for patient referrals undermines the integrity of our health care system,” Acting Assistant Attorney General Chad A. Readler of DOJ's Civil Division said in a statement. “Patients deserve the unfettered, independent judgment of their health care professionals.”

The hospital system also allegedly misrepresented a CT radiology center as an outpatient department in its billing claims.

The allegations that arose were corrected before the Beaumont hospitals created a new health system, Beaumont Health, in 2014, the company said in an Aug. 2 statement. The system also pointed out that the allegations never questioned the quality of care provided by Beaumont hospitals.

“Since the formation of Beaumont Health in 2014, the new management team has implemented additional compliance and legal review processes to ensure our effective compliance with the complex regulations applicable to health systems and to provide additional assurance that these types of issues do not arise again,” Beaumont Health’s President and CEO John Fox said in the statement.

Under terms of the settlement, Beaumont will pay $82.74 million to the United States and $1.76 million to the State of Michigan. The allegations were brought in four whistleblower lawsuits, which allows private parties to sue on behalf of the government and receive a share of any recovery. Beaumont also entered into a five-year integrity agreement with HHS for five years.

“This result should impress on the medical community the fact that we will aggressively take action to recover monies wrongfully billed to Medicare, through the remedies provided in the federal False Claims Act,” U.S. Attorney Matthew Schneider for the Eastern District of Michigan said in a statement. “I would like to commend the new leadership at Beaumont Hospital for making things right once its past wrongdoing was brought to its attention by federal investigators.”