A consultant who effectively controlled a teaching hospital, first as CEO until 1997 and later through a management company, was ordered to repay three times the reimbursement for Medicare and Medicaid claims submitted by the hospital from 1995 through 2000 plus a $7,500 penalty for each claim submitted to the programs during that six-year period. The District Court for the Northern District of Illinois imposed a total penalty of $64,259,032.50 under the False Claims Act. The court held that the consultant conspired with hospital administrators and physicians to provide kickbacks and engage in improper financial relationships in return for patient referrals to the hospital he controlled and owned indirectly. He committed numerous overt acts in furtherance of the conspiracy and caused false claims to be submitted to Medicare and Medicaid, the court found.
Although he actively concealed his financial interest in the hospital and its management company with a maze of corporate entities, the consultant earned 99 percent of all management fees during the six-year period in addition to his salary from the hospital. Between 1995–2000, the management company's distribution to the consultant and his family totaled over $9.5 million, generally being paid to family trusts. The consultant withheld information about his ownership interests from independent auditors during routine hospital audits.
Violations of statutes and common law. Payments to physicians arranged by the consultant in return for patient referrals are prohibited by the statute commonly known as Stark II, which became effective January 1, 2005. Prohibited financial relationships include any "compensation" paid directly or indirectly to a referring physician. Similarly, such referrals were prohibited by the Anti-kickback statute. By knowingly certifying or causing other hospital staff to certify compliance with these statutes in Medicare cost reports, the consultant violated the False Claims Act. Furthermore, all claims for services provided by the hospital as a result of prohibited referrals were false, according to the Act.
In addition, under both its common-law-fraud and mistake-of-fact claims, the United States would be entitled to recover the amounts improperly provided to Edgewater and the benefits that accrued to the consultant personally. However, to avoid double redress for a single wrong, these damages were set aside.
SOURCE: U.S. v. Rogan, N.D. Ill., Sept. 29, 2006.
For more information on this and related topics, consult the CCH® Medicare and Medicaid Guide.
Visit our News Library to read more news stories.
