On August 2, 2018, DOJ announced that Detroit-based Beaumont Health would pay $84 million to settle claims that between August 31, 2004, and January 31, 2012, its arrangements with eight physicians violated the Anti-Kickback Statute (AKS) and the Stark Law by providing improper remuneration in the form of free or below-market value office space and employees and providing them with compensation in excess of fair market value.  The settlement agreement also settles claims that from 2006 to 2012, Beaumont misrepresented that one of its CT radiology centers qualified as an outpatient department of the hospital.  As part of the settlement, Beaumont is entering into a five-year Corporate Integrity Agreement, during which time its referral arrangements will be reviewed by an independent review organization.

The government’s investigation into these arrangements commenced as a result of the filing of four separate qui tam lawsuits against Beaumont between August 2010 and September 2011.  The relators, each represented by separate counsel, were Beaumont employees and respectively held roles of Vice President of Research, Chief Operating Officer, Vice President of Service Line Development, and Director of Diagnostic Radiology.  On October 15, 2015, the four qui tams were consolidated under the initial lawsuit.

Numerous Problems with Physician Arrangements

The lawsuits allege that Beaumont lacked any physician contract management system, physician contracts were a “mess” and sometimes could not be found, many contracts had not been reviewed for Stark/AKS compliance, many contracts lacked job descriptions, and physicians were not required to track their hours or show they had performed any services in exchange for payment.  The lawsuits allege that many medical directorships were duplicative, with multiple physicians providing the same administrative services or having “double-hatted” positions where Beaumont paid physicians for work they were already being paid to provide to the hospital under other contracts.

The lawsuits allege that Beaumont entered into medical directorships with four cardiologists at Academic Heart & Vascular (AHV) that paid each doctor $500,000 or more despite the physicians being in full-time medical practice.  After AHV made clear it was considering moving their practice to a competing health system in Detroit, Beaumont allegedly increased the medical director payments to between $671,304 and $734,218 per doctor, even though the duties performed by the directors did not change.

Two of the lawsuits allege that Beaumont retained FTI Consulting in 2009 to review its physician contracting.  Even though FTI issued a “devastating” report noting numerous compliance problems, the lawsuits allege that Beaumont refused to address the issues with its physician contracts.  The former COO also alleged that she attempted to bring in another law firm to review the physician contracts and raised the issue with the hospital’s outside auditor.

The $84 million settlement releases claims only as to Beaumont and does not include any release for the eight physicians identified in the settlement agreement or any other individuals (one qui tam had included Beaumont’s former CEO and former Chief Legal Officer as named defendants).  The settlement agreement requires Beaumont to “cooperate fully and truthfully with the United States’ investigation of individuals and entities not release” and to provide to the United States, upon request, copies of non-privileged reports, interview memos, or records relating to the hospital’s own investigation.

For further information about this settlement or similar FCA cases involving Stark/AKS violations, contact Brian Roark at broark@bassberry.com.