SC Health System Pays $36.5M to Settle Kickback Allegations

A Greenville, South Carolina-based healthcare system has agreed to pay $36.5 million to resolve kickback allegations that it was tying payments to orthopedic surgeons to referral volume and/or value.

St. Francis Physician Services, Inc., St. Francis Hospital, and Bon Secours St. Francis Health System, Inc. (collectively “St. Francis”), owner and operator of the St. Francis healthcare system, agreed to the payment to settle claims that it violated the False Claims Act, the Federal Stark Law, and the Federal Anti-Kickback Statute.

According to the Department of Justice press release, the settlement resolves allegations that “St. Francis caused the submission of false claims to Medicare and to TRICARE as a result of an unlawful contractual payment structure between St. Francis and Piedmont Orthopedic Associates (“POA”), whereby POA’s compensation was tied to the volume or value of the practice’s referrals to St. Francis.” The original complaint alleged that the bonus payments paid by St. Francis violated the Federal Stark Law and the Federal Anti-Kickback Statute.

The original complaint detailed the alleged violations and claimed that the purported “scheme” began in 2006. According to the allegations in the complaint, when faced with potential competition from POA, a strategy was developed to purportedly “lure the POA surgeons into becoming employees of the hospital system by paying them excessive compensation, including an annual bonus pool.”

Furthermore, according to the complaint, “the criteria used to determine whether the $3.95 million bonuses were paid each year incentivized and rewarded the physicians for generating referrals to the hospital system for physical therapy, laboratory, radiology, and other ancillary services.”

In the Department of Justice press release, U.S. Attorney for the District of South Carolina Adair F. Boroughs said, “Medical providers should base health care decisions on what is best for the patient, and not on financial incentives and related schemes.”

Boroughs continued, “We are grateful the relator brought these allegations forward. Relators are critical to identifying fraud and protecting the integrity of our Medicare system.”

Under the False Claims Act, a private party (called the relator) can file a lawsuit on behalf of the United States. The relator is then entitled to a share of the recovery. In this matter, the relator will receive $10.2 million of the settlement amount.

The claims resolved by the settlement are allegations only. There has been no determination of liability.