On February 8, 2016, the United States District Court in the Southern District of Georgia approved the settlement agreement ending a whistleblower lawsuit initiated on March 9, 2011 against Memorial Health University Medical Center (“Memorial Medical Center”) and three affiliated entities in a case that highlights the Department of Justice’s (“DOJ”) vigorous scrutiny of physician compensation arrangements. The non-profit hospital, based in Savannah, Georgia, agreed to pay $9.89 million with $2.29 million going to the relator, the hospital’s former president and CEO, who initiated the action under the qui tam provision of the False Claims Act (“FCA”).  The settlement is the largest civil healthcare fraud recovery recorded by the U.S. Attorney’s Office for the Southern District of Georgia.

The underlying lawsuit alleged that Memorial Medical Center acquired a physician practice for compensation in excess of fair market value (“FMV”), and that the acquisition resulted in a projected financial loss of approximately $670,000 per year over a five-year period.  According to the complaint, the defendant hospital engaged in a complex scheme to compensate its employed and contracted physicians at rates above FMV in return for the promise of patient referrals–thereby violating both the federal Anti-Kickback Statute (“AKS”) and the physician self-referral law (“Stark Law”), and tainting Medicare and Medicaid payments.Continue Reading $9.9 Million Settlement To Resolve Allegations That Hospital System Overpaid Physicians Approved by Georgia Federal Court