The Department of Justice announced on October 30, 2009 that McAllen Hospitals, L.P. d/b/a South Texas Health System, a hospital system based in McAllen, Texas agreed to pay the United States $27.5 million to settle claims that it violated the False Claims Act, the Anti-Kickback Statute and the Stark Statute between 1999 and 2006. The settlement involves allegations that the defendants entered into financial relationships with several doctors in McAllen in order to induce them to refer patients to the defendants’ hospitals. The government alleged that these payments were disguised through a series of sham contracts, including medical directorships and lease agreements.
Two of the Government’s attorneys commented that payments for referrals are improper, corrupt physicians’ judgment in treating patients and contribute to the cost of health care. Tony West, the Assistant Attorney General for the Department’s Civil Division, stated “improper financial relationships between health care providers and their referral sources can corrupt a physician’s judgment about the patient’s true healthcare needs. In addition to yielding a substantial recovery for taxpayers, this settlement should deter similar conduct in the future and help make health care more affordable for patients.” Tim Johnson, U.S. Attorney for the Southern District of Texas said “payment by hospitals to doctors for patient referrals violates federal law and carries the inherent risk that the independent judgment of doctors regarding the best facility for the treatment and care for a particular patient may be adversely influenced; the patient and his medical needs should always be foremost. Our district will continue in its joint effort with our law enforcement partners to enforce these federal laws that protect the public.”
The settlement requires the hospital system to enter into a 5-year Corporate Integrity Agreement. The hospital system must establish procedures for tracking and evaluating financial arrangements between its health care facilities and their referral sources. The agreement also requires specific training for health system representatives involved with financial arrangements, an independent third-party’s annual review of the health system’s compliance with the Corporate Integrity Agreement obligations involving financial arrangements, and a report to the Office of Inspector General by the independent third-party reflecting the results of the review.
Of the $27.5 million settlement, the federal government, the state of Texas and Bruce Moilan, the qui tam whistleblower (a former employee of the health system) will share in the proceeds.
The Department of Justice’s press release can be found here.
A New Yorker magazine article released in June 2009 noted that McAllen, Texas is one of the most expensive health care markets in the United States. Read “The Cost Conundrum” article.