Medical scanning company and owner pay more than $85.5 million to settle whistleblower’s kickback, Stark Law allegations

by Ben Vernia | October 12th, 2023

On October 10, the Department of Justice announced that Florida-based Cardiac Imaging, Inc., and its owner had agreed to pay at least $85,480,000 to settle a whistleblower’s allegations that the company violated the Antikickback Statute and the Stark Law in connection with mobile cardiac PET scans. According to DOJ’s press release:

Cardiac Imaging Inc. (CII), headquartered in Illinois, and its founder, owner, and CEO Sam Kancherlapalli, a resident of Florida, have agreed to pay a total of $85,480,000 to resolve False Claims Act allegations that they paid referring cardiologists excessive fees to supervise PET scans in violation of the Anti-Kickback Statute (AKS) and the Physician Self-Referral Law (Stark Law). CII agreed to pay $75 million, plus additional amounts based on future revenues, and Kancherlapalli agreed to pay $10,480,000. These settlements are based on their ability to pay.

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The United States alleged that between March 1, 2014, and May 31, 2023, CII and Kancherlapalli knowingly caused false or fraudulent claims to federal health care programs arising from violations of the AKS and the Stark Law. Specifically, with Kancherlapalli’s oversight and approval, CII allegedly paid kickbacks to referring cardiologists in the form of above-fair market value fees of $500 or more per hour, ostensibly for the cardiologists to supervise the PET scans for the patients they referred to CII. The United States alleged these fees substantially exceeded fair market value for the cardiologists’ services because CII paid the referring cardiologists for each hour CII spent scanning the cardiologists’ patients, including time the cardiologists were away from CII’s mobile scanning units providing care for other patients or were not even on site. CII’s fees also purportedly compensated the cardiologists for additional services beyond supervision that were not actually provided. CII purported to rely on a consultant’s fair market value analysis that the United States alleged CII knew was premised on fundamental inaccuracies about the services referring physicians provided and that the consultant ultimately withdrew.

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In connection with the settlement, CII and Kancherlapalli entered into a five-year Corporate Integrity Agreement (CIA) with the HHS-OIG. The CIA requires, among other compliance provisions, that CII implement measures designed to ensure that arrangements with referring physicians are compliant with the AKS and the Stark Law. The CIA also requires that CII implement a centralized annual risk assessment and internal review process to identify and address the AKS and the Stark Law risks associated with arrangements and retain an Independent Review Organization to perform a systems and transactions review of arrangements.

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The whistleblower’s award has not yet been determined, the government announced.

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