Halifax Hospital Medical Center and Halifax Staffing, Inc. (Halifax), on the day of jury selection, agreed to pay $85 million and made other concessions as part of a settlement with the federal government to resolve allegations that Halifax violated STARK prohibitions and the False Claims Act (FCA). The settlement amount is the largest STARK sanction to date against a hospital system for STARK law violations.
The case is styled United States ex rel v. Halifax Hospital Medical Center, et al., No. 09-cv-1002 (M.D. Fla). The government’s allegations stemmed from Halifax’s financial relationships with a group of oncologists. The case was initiated by a compliance officer of the hospital, and the Justice Department agreed to take the case pursuant to the FCA.
In the lawsuit, the government alleged that Halifax compensated a group of oncologists and neurologists with monetary bonuses for referring Medicare patients to the hospital in a manner that violated STARK. The government alleged that the oncologists were improperly compensated with incentive bonuses that included the value of prescription drug tests the doctors ordered and Halifax included in its billings to Medicare. The government also alleged that Halifax improperly compensated neurosurgeons (who referred Medicare patients to Halifax) in excess of fair market value with bonuses equal to the difference between base salaries and collections, call pay and benefits. Halifax denied liability, but determined that resolving the dispute without a trial was best. STARK, the federal self-referral statute, prohibits referrals of patients who receive designated health services (DHS) where the referrals are between a doctor and an entity with whom the doctor has a financial relationship. If a referral for a DHS is prohibited by STARK and there is no applicable exception to STARK’s prohibition, the entity cannot bill the patient, Medicare, or Medicaid for the services provided. Sanctions for a STARK violation can be steep, as demonstrated by this case against Halifax. STARK sanctions include civil monetary penalties of up to $15,000 per service. Additionally, penalties of up to $100,000 may be imposed for “circumvention” schemes (arrangements designed to ensure referrals that violate STARK). If the Halifax case proceeded to trial and the jury found against Halifax, Halifax faced up to $500 million in sanctions.
In addition to the $85 million settlement funds, Halifax entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). The agreement requires Halifax to overhaul its internal compliance programs and submit all future claims to federal health programs to an independent reviewer for the next five years. Halifax is required to hire extra independent reviewers and compliance officers to oversee adherence to proper provider arrangements. A purpose of STARK is to prevent healthcare providers from making medical decisions and referrals based on financial incentives rather than what is in the best medical interest of the patient. Healthcare providers and entities should always ensure qualified experts review all internal practices and provider arrangements for compliance with federal regulations.
The last thing a healthcare provider should have to lose sleep over is whether their practices violate STARK (or any federal or state regulations). Contracts and financial arrangements should be scrutinized to ensure compliance with federal and state law. Every healthcare provider should have strong compliance programs and protocol in place and periodically update them to minimize the possibility of serious legal and financial consequences that can attend noncompliance with STARK and other healthcare regulations.
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