Whistleblower Earns $3 Million Reward in Stark Law Case

HCA Inc., one of the nation’s largest for-profit hospital chains, has agreed to pay $16.5 million to settle claims that it violated the False Claims Act and the Stark Statute by entering into favorable leasing arrangements with doctors who referred patients to the hospital. 

The whistleblower who brought the case will receive 18.5% of the settlement as a reward, or more than $3 million.

The settlement resolves allegations that HCA subsidiaries Parkridge Medical Center and HCA Physician Services (HCAPS) provided financial benefits to a physician group, Diagnostic Associates of Chattanooga, as an incentive for physicians to refer patients to HCA facilities.  

The financial incentives included leasing office space from the physician group at a rate well in excess of fair market value, and releasing the physician group from a separate lease obligation.

The whistleblower was an appraiser who had been hired by the hospital to provide a fair market appraisal of the physician group's property.  When he saw that the hospital was renting the property from the physician group at a rate far above his fair market appraisal, he brought this lawsuit on behalf of the government to recover for violations of the Stark Law and the False Claims Act.

The Stark Law limits the types of financial relationships that may exist between hospitals and physicians who potentially may refer patients to them.  The theory behind the law is that physicians should should make decisions regarding referrals to health care facilities based on what is in the best interest of patients without being induced by payments from hospitals competing for their business.

When the Stark Law is violated, then any resulting Medicare or Medicaid claims are considered “false claims” under the False Claims Act.

The lawsuit was brought under the qui tam, or whistleblower, provisions of the False Claims Act.  The qui tam provisions allow a private citizen to bring a lawsuit on behalf of the United States and share in any recovery.  In this case, the whistleblower will receive 18.5% of the $16.5 million settlement, or more than $3 million, as his reward.

If you are aware of questionable financial relationships or false claims submitted to Medicare or Medicaid, then you should consult with an experienced healthcare attorney immediately to protect your rights.  To schedule a free and confidential consultation by telephone or in person, call my office today at (917) 652-6504 or click here to communicate with me via email.

John Howley
New York, New York

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