HCA pays $16.5 million to settle False Claims Act allegations involving Chattanooga hospital

by Ben Vernia | September 21st, 2012

On September 20, the Department of Justice announced that HCA, the massive hospital chain, had agreed to pay $16.5 million to settle allegations that its Chattanooga, Tennessee hospital violated the False Claims Act. According to DOJ’s announcement:

HCA Inc., one of the nation’s largest for-profit hospital chains, has agreed to pay the United States and the state of Tennessee $16.5 million to settle claims that it violated the False Claims Act and the Stark Statute, the Department of Justice announced today.

As alleged in the settlement agreement, during 2007, HCA, through its subsidiaries Parkridge Medical Center, located in Chattanooga, Tenn., and HCA Physician Services (HCAPS), headquartered in Nashville, Tenn., entered into a series of financial transactions with a physician group, Diagnostic Associates of Chattanooga, through which it provided financial benefits intended to induce the physician members of Diagnostic to refer patients to HCA facilities. These financial transactions included rental payments for office space leased from Diagnostic at a rate well in excess of fair market value in order to assist Diagnostic members to meet their mortgage obligations and a release of Diagnostic members from a separate lease obligation.

The Stark Statute restricts financial relationships that hospitals may enter into with physicians who potentially may refer patients to them. Federal law prohibits the payment of medical claims that result from such prohibited relationships.

The suit was originally brought by a qui tam relator (whistleblower), who will receive 18.5% of the federal share of the recovery (for a total reward of $2,903,205).

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