Texas hospital settles whistleblower’s self-referral and kickback allegations for $18.2 million

by Ben Vernia | December 2nd, 2021

On December 2, the Department of Justice announced that a Flower Mound, Texas-based hospital had agreed to pay $18.2 million to resolve allegations, originally brought by a whistleblower, that the hospital impermissibly took patient referrals into account in selling interests in the hospital to doctors.

Flower Mound Hospital Partners LLC (Flower Mound Hospital), a partially physician-owned hospital in Flower Mound, Texas, has agreed to pay $18.2 million to resolve allegations that it violated the False Claims Act by knowingly submitting claims to the Medicare, Medicaid and TRICARE programs that resulted from violations of the Physician Self-Referral Law and the Anti‑Kickback Statute.

The Physician Self‑Referral Law, commonly known as the Stark Law, prohibits a hospital from billing for certain services referred by physicians with whom the hospital has a financial relationship, unless that relationship satisfies one of the law’s statutory or regulatory exceptions. The Anti‑Kickback Statute prohibits offering or paying remuneration to induce the referral of items or services covered by Medicare, Medicaid and other federally funded programs. Both the Stark Law and the Anti-Kickback Statute are intended to ensure that medical judgments are not compromised by improper financial inducements.

The settlement resolves allegations that Flower Mound Hospital violated the Stark Law and the Anti-Kickback Statute when it repurchased shares from physician-owners aged 63 or older and then resold those shares to younger physicians. The United States alleges that Flower Mound Hospital impermissibly took into account the volume or value of certain physicians’ referrals when it (1) selected the physicians to whom the shares would be resold and (2) determined the number of shares each physician would receive.

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The hospital also agreed to enter into five-year Corporate Integrity Agreement with the Office of Inspector General of the Department of Health and Human Services.

DOJ announced that the whistleblower, a physician, will receive $3 million of the settlement (a 16.5% relator’s share).

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