Sutter Health will pay more than $30 million to settle kickback allegations outlined in a federal whistleblower lawsuit in which a Davis law firm played a major role.
Hirst Law Group P.C. represented the whistleblower, Laurie Hanvey, a former compliance officer with Sutter Medical Center in Sacramento. Hanvey filed a lawsuit under the federal False Claims Act accusing Sutter Health of paying kickbacks to Sacramento Cardiovascular Surgeons Medical Group Inc. in exchange for patient referrals.
Terms of the settlement, which was unsealed Thursday, call for Sutter to pay $30.5 million to the federal government; while Sac Cardio — doctors Michael T. Ingram, Robert Kincade and James Longoria — will pay more than $500,000 without admitting the fraud allegations, attorney Michael Hirst said in a news release.
Amy Thoma Tan, director of public affairs for Sutter Health, said Friday that the settlement “reflects a narrow and favorable agreement with the plaintiff and the Department of Justice following its nearly five-year investigation into the original allegations.”
Thoma Tan also noted that Sutter admits no wrongdoing as part of the settlement, which she said returned alleged overpayments Sutter Health received from the Centers for Medicare & Medicaid Services.
“Any assertion that the settlement was based upon a finding of payments for referrals is completely inaccurate, and Sutter denies any such conduct. Sutter has in place a strong compliance program which had identified the issues raised by Ms. Hanvey,” she said. “Indeed, Ms. Hanvey was working with the hospital on the process of remediating these issues when she elected to file her lawsuit under seal.”
The case was investigated by the U.S. Department of Justice as well as the California Attorney General’s Office.
According to the lawsuit, Sutter and Sac Cardio engaged in an illegal course of conduct over a two-year period, from September 2012 through September 2014, during which Sutter knowingly provided Sac Cardio kickbacks for referrals of Sac Cardio’s patients to Sutter for both inpatient and outpatient procedures.
The suit further alleged that Sutter provided paid physician assistants to Sac Cardio, and paid Sac Cardio exorbitant rates for both “medical director” and “call coverage” agreements in order to spur referrals from Sac Cardio to Sutter, rather than to other hospitals.
“When physicians receive exorbitant payments to induce referrals of their patients to a hospital, everyone but the physicians and the hospital loses,” Hirst said. “Patients have a right to believe their doctor’s judgment is not affected by the doctor’s personal compensation. And health insurers like Medicare have a right to believe the medical services they pay for are reasonable and necessary, not medical services ordered as a ‘thank you’ for a generous kickback.”
Hanvey alleged in the lawsuit that Sutter’s conduct violated both the federal Anti-Kickback Statute as well as the Stark law prohibiting physician self-referrals.
Among the specific claims:
* Sac Cardio received free physician assistants paid by Sutter at over $56,000 per month and $680,000 annually, for which Sac Cardio billed Medicare and others for the services performed by these Sutter-provided physician assistants.
* Sac Cardio surgeons received up to $318,264 annually for services they allegedly performed as “medical directors” of various service lines at Sutter, including as medical directors for the Sutter Heart Institute, the Transplant Ventricular Assist Device Program and the Surgical Ablation Program.
* Sac Cardio doctors also received up to $912,500 annually to supposedly assure the availability of surgeons on an emergency call basis, although the whistleblower alleged that other cardiovascular surgeons with fewer referrals to Sutter were not included in the call coverage contracts. As alleged, these “call coverage” contracts allowed Sac Cardio to bill for any services they performed, as well as to receive from Sutter $2,500 per shift for 365 days each year.
* In total, the complaint alleges that Sac Cardio received $1,910,764 in illegal annual payments from Sutter, designed to induce referrals.
Hanvey worked with California hospitals for more than 25 years, including as the Sutter Medical Center compliance officer starting in 2012. According to Hirst, she repeatedly brought the alleged violations to the attention of her supervisors and Sutter management, but the practices continued.
For bringing her evidence to the government, Hanvey and her counsel will receive $5,795,000 plus interest from settlement of this portion of her claims.
“Ms. Hanvey is exactly the kind of deserving whistleblower the False Claims Act envisions,” Hirst said. “Without her courage in coming forward, none of this would likely have come to light.”
The government’s case was investigated by Assistant U.S. Attorneys Sara Winslow and Kimberly Friday of the U.S. Attorney’s Office in San Francisco, Rohith Srinivas of the Department of Justice in Washington, D.C., and Deputy Attorney General Elizabeth Voorhies of the California Department of Justice.
Second settlement revealed
On Friday, the California Department of Justice announced that Sutter Health agreed to pay an additional $15,117,516 to resolve further allegations of Stark Law violations and of double-billing for certain services.
U.S. Attorney McGregor W. Scott said Sutter self-disclosed the conduct to the government, including its “submission of claims to Medicare that resulted from referrals by physicians to whom certain Sutter hospitals paid compensation under personal services arrangements that exceeded the fair market value of the services provided, leased office space at below-market rates, and paid reimbursements of physician-recruitment expenses that exceeded the actual recruitment expenses at issue.”
“Providers must rigorously comply with the law and Medicare requirements,” Scott said in a news release. “This office is committed to pursuing enforcement actions that will ensure the integrity of federal health care programs.”
Thoma Tan, the Sutter Health spokeswoman, released an additional statement Friday noting that the settlement “involves various matters, including a self-disclosure dating back to 2010, and two additional self-disclosures.”
“Sutter’s compliance program discovered the issues, just as it was designed to do, and Sutter brought these matters forward on our own initiative,” she said. “Since the date of the 2010 self-disclosure, Sutter has invested significant resources into enhancing its compliance program and will continue to do so in its ongoing efforts toward assuring absolute compliance with all applicable laws and regulations.”
— Reach Lauren Keene at lkeene@davisenterprise.net or 530-747-8048. Follow her on Twitter at @laurenkeene