Daytona Beach hospital system pays $85 million to settle Stark Act allegations

by Ben Vernia | March 12th, 2014

On March 11, the Department of Justice announced that Halifax Medical Center and its affiliated staffing company have agreed to pay $85 million and enter into a five-year Corporate Integrity Agreement to resolve allegations that the companies violated the Stark Act’s prohibitions on conflicts in physician referrals. According to DOJ’s press release:

Halifax Hospital Medical Center and Halifax Staffing Inc. (Halifax), a hospital system based in the Daytona Beach, Fla., area, have agreed to pay $85 million to resolve allegations that they violated the False Claims Act by submitting claims to the Medicare program that violated the Physician Self-Referral Law, commonly known as the Stark Law, the Justice Department announced today.

The Stark Law forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital. In this case, the government alleged that Halifax knowingly violated the Stark Law by executing contracts with six medical oncologists that provided an incentive bonus that improperly included the value of prescription drugs and tests that the oncologists ordered and Halifax billed to Medicare. The government also alleged that Halifax knowingly violated the Stark Law by paying three neurosurgeons more than the fair market value of their work.

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In a Nov. 13, 2013, ruling, the U.S. District Court for the Middle District of Florida ruled that Halifax’s contracts with its medical oncologists violated the Stark Law. The case was set for trial on March 3, 2014, on the government’s remaining claims against Halifax when the parties reached this settlement.

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As part of the settlement announced today, Halifax also has agreed to enter into a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG), which obligates Halifax to undertake substantial internal compliance reforms and to submit its federal health care program claims to independent review for the next five years.

The case was originally brought by a qui tam whistleblower, a hospital employee who, the government announced, will receive $20.8 million of the settlement (a 24.5% relator’s share).

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