Lexington Medical Center Settles Federal Civil Fraud Lawsuit for $17 Million

Aug. 1, 2016
West Columbia, South Carolina-based Lexington Medical Center has settled a federal civil fraud lawsuit filed by a former physician employee-turned whistleblower for $17 million.

West Columbia, South Carolina-based Lexington Medical Center, a 428-bed hospital that serves the South Carolina Midlands area, has settled a federal civil fraud lawsuit filed by a former physician employee-turned whistleblower for $17 million.

According to a U.S. Department of Justice press release, the settlement resolves allegations that Lexington Medical Center "violated the Physician Self-Referral Law (the Stark Law) and the False Claims Act by maintaining improper financial arrangements with 28 physicians."

In settling the lawsuit, Lexington Medical Center admitted no fault. The Columbia-based newspaper The State published the following statement from hospital spokeswoman Jennifer Wilson: “The settlement, in which Lexington Medical Center expressly denied any wrongdoing, allowed the medical center to avoid continued costly litigation that could have lasted for several years.”

"Wilson stressed none of the matters covered in the lawsuit were related ‘to the quality of care provided by Lexington Medical Center or inaccurate billing'," according to The State article.

A former physician employed by Lexington Medical Center, David Hammett, M.D., filed the lawsuit in federal court in Columbia, S.C. and the Justice Department had joined in the lawsuit against the Lexington County Health Services District Inc., doing business as Lexington Medical Center. The lawsuit was filed under the whistleblower provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery, according to the Justice Department press release. Dr. Hammett will receive approximately $4.5 million of the recovered funds, the press release stated.

The lawsuit alleged that the hospital entered into asset purchase agreements for the acquisition of physician practices or employment agreements with 28 physicians that violated the Stark Law because they took into account the volume or value of physician referrals, were not commercially reasonable or provided compensation in excess of fair market value. 

The State article reported that Hammett, a 2001 Wake Forest Medical School graduate, alleged the hospital was violating federal law by submitting illegal claims to Medicare and other federal health insurance programs, according to his complaint. And, Hammett, a neurologist, also alleged Lexington Medical Center required him and other doctors to send patients to its hospital facilities for further tests and that the doctors would be compensated for making referrals, according to The State article.

As part of the settlement, according to the Justice Department press release, Lexington Medical Center will enter into a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services-Office of the Inspector General (HHS-OIG) that requires Lexington Medical Center to implement measures designed to avoid or promptly detect future conduct similar to that which gave rise to this settlement.

And, the Justice Department press release also stated, “The Stark Law is intended to ensure that physician referrals are made based on the medical needs of the patients and are not tainted by certain financial arrangements. Thus, 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 enumerated exceptions. 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 intended to insulate the referrals from financial considerations," the Justice Department stated in the release.

"This case demonstrates the United States’ commitment to ensuring that doctors who refer Medicare beneficiaries to hospitals for procedures, tests and other health services do so only because they believe the service is in the patient’s best interest, and not because the physician stands to gain financially from the referral," Principal Deputy Assistant Attorney General Benjamin Mizer, head of the Justice Department’s Civil Division, said in a prepared statement.

The DOJ also states that the civil settlement highlights the government’s emphasis on combating health care fraud through the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. "The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation," the Justice Department stated.

Due to the False Claims Act, since January 2009, the Justice Department has recovered more than $30 billion through False Claims Act cases, with more than $18.3 billion of that amount recovered in cases involving fraud against federal health care programs.

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