Oklahoma hospital, management company, and physicians pay over $77 million to settle kickback, Stark Law claims

by Ben Vernia | July 8th, 2020

On July 8, the Department of Justice announced that an Oklahoma City specialty hospital, its management company, and physicians and their practice have agreed to pay $77.2 million to settle civil allegations, originally brought by a whistleblower, that the defendants engaged in prohibited financial arrangements and kickbacks, resulting in the submission of false claims the federal and Oklahoma governments. According to DOJ’s press release:

Oklahoma Center for Orthopaedic and Multi-Specialty Surgery (OCOM), a specialty hospital in Oklahoma City, Oklahoma, its part-owner and management company, USP OKC, Inc. and USP OKC Manager, Inc. (collectively USP), Southwest Orthopaedic Specialists, PLLC (SOS), an Oklahoma City-based physician group, and two SOS physicians, will pay $77.2 million to resolve allegations under the False Claims Act and the Oklahoma Medicaid False Claims Act of improper relationships between OCOM and SOS, resulting in the submission of false claims to the Medicare, Medicaid and TRICARE programs, the Justice Department announced today.    

The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded programs.  The Physician Self-Referral Law, commonly known as the Stark Law, prohibits a hospital from billing Medicare for certain services referred by physicians with whom the hospital has an improper financial arrangement, including the payment of compensation that exceeds the fair market value of the services actually provided by the physician and the provision of free or below-market rent and office staff.  Both the Anti-Kickback Statute and the Stark Law are intended to ensure that physicians’ medical judgments are not compromised by improper financial incentives and instead are based on the best interests of their patients.

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The settlement resolves allegations that between 2006 and 2018, OCOM and USP provided improper remuneration to SOS and certain of its physicians in exchange for patient referrals to OCOM in the form of (i) free or below-fair market value office space, employees, and supplies, (ii) compensation in excess of fair market value for the services provided by SOS and certain of its physicians, (iii) equity buyback provisions and payments for certain SOS physicians that exceeded fair market value, and (iv) preferential investment opportunities in connection with the provision of anesthesia services at OCOM.  The alleged conduct resulted in the submission of claims for services provided to these illegally referred patients, in violation of the False Claims Act and the Oklahoma Medicaid False Claims Act.  The settlement also resolves issues arising out of USP’s preferential offering of investment opportunities to physicians at four surgery facilities in Texas.  As a result of this settlement, USP will pay $60.86 million to the United States, $5 million to the State of Oklahoma, and $206,000 to the State of Texas.  SOS and two of its physicians, Anthony L. Cruse, D.O. and R.J. Langerman, Jr., D.O., will pay $5.7 million to the United States, and $495,619 to the State of Oklahoma.

Contemporaneous with the civil settlement, OCOM and SOS each entered into five-year Corporate Integrity Agreements (CIAs) with the U.S. Department of Health and Human Services – Office of Inspector General (HHS-OIG).  The CIAs require, among other things, that OCOM and SOS each maintain a compliance program and hire an Independent Review Organization to review arrangements entered into by or on behalf of their respective entities.  They also increase individual accountability by requiring compliance-related certifications from their key executives. 

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The Government stated that the whistleblower’s share of the recovery has yet to be determined.

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