Since January 2009, the DOJ has recovered more than $13.4 billion through False Claims Act cases involving fraud against federal health care programs, and last month, Halifax Hospital Medical Center and Halifax Staffing, Inc. (collectively, “Halifax”) became the most recent contributor. Halifax recently settled with the United States Department of Justice (DOJ) for $85 million to resolve allegations that it violated the False Claims Act by submitting claims to the Medicare program that violated the Physician Self-Referral Law, commonly known as the Stark Law. The Stark Law prohibits an entity from billing Medicare for certain designated health services (DHS) referred by physicians who have (or whose immediate family member has) a financial relationship (ownership, investment, or compensation) with the entity, unless an exception applies. Here, the DOJ (which intervened on a Halifax employee whistleblower/relator qui tam action) alleged that Halifax knowingly violated the Stark Law by entering into physician employment agreements that provided improper incentive bonuses that were based on the value of outpatient prescription drugs and tests (both DHS under the Stark Law) ordered by the physicians. The DOJ also alleged that Halifax knowingly violated the Stark Law by paying three neurosurgeons more than fair market value for their services through questionable compensation structures that included fixed base salaries, incentive compensation bonuses equal to all cash collections over their annual base salaries (which routinely amounted to more than four times their respective base salaries), and non-memorialized compensation for call coverage services. Related claims brought under the Anti-Kickback Statute were dismissed prior to settlement due to the broad allowances of compensation structures for bona fide employment relationships amongst referral sources that do not exist under the Stark Law.

In addition to paying $85 million ($20.5 million of which will be paid to the Halifax employee whistleblower), Halifax agreed to enter into a Corporate Integrity Agreement with the United States Department of Health and Human Services’ Office of Inspector General, which obligates Halifax to undertake substantial internal compliance reforms and submit claims to federal health care programs to a costly independent reviewer for the next five years. By agreeing to these terms, Halifax avoided potential exclusion from federal health care programs, which is catastrophic to any provider.