Southern California hospital pays nearly $3.3 million to settle Stark self-referral allegations

by Ben Vernia | January 17th, 2016

On January 15, the Department of Justice announced that Tri-City hospital in Oceanside, California, had agreed to pay nearly $3.3 million to settle civil allegations that it violated the Stark Law against physician self-referrals and the False Claims Act. According to DOJ’s press release on the case (which appears to have originated with a government investigation, and not from a whistleblower’s lawsuit):

Tri-City Medical Center, a hospital located in Oceanside, California, has agreed to pay $3,278,464 to resolve allegations that it violated the Stark Law and the False Claims Act by maintaining financial arrangements with community-based physicians and physician groups that violated the Medicare program’s prohibition on financial relationships between hospitals and referring physicians, the Justice Department announced today.

The Stark Law generally forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital unless that relationship falls within an enumerated exception.  The exceptions generally require, among other things, that the financial arrangements do not exceed fair market value, do not take into account the volume or value of any referrals and are commercially reasonable.  In addition, arrangements with physicians who are not hospital employees must be set out in writing and satisfy a number of other requirements.

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The settlement announced today resolves allegations that Tri-City Medical Center maintained 97 financial arrangements with physicians and physician groups that did not comply with the Stark Law.  The hospital identified five arrangements with its former chief of staff from 2008 until 2011 that, in the aggregate, appeared not to be commercially reasonable or for fair market value.  The hospital also identified 92 financial arrangements with community-based physicians and practice groups that did not satisfy an exception to the Stark Law from 2009 until 2010 because, among other things, the written agreements were expired, missing signatures or could not be located.   *   *   *

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