U.S. Joins Lawsuit Alleging Illegal Physician Compensation by Alabama Health Firm

The government has intervened in a False Claims Act lawsuit against Infirmary Health System Inc. and its related entities—IMC-Diagnostic and Medical Clinic P.C., Diagnostic Physicians Group P.C., and Infirmary Medical Clinics P.C.—the Department of Justice announced today. The lawsuit alleges that IMC-Diagnostic and Medical Clinic, in Mobile, Alabama, billed Medicare for services referred by Diagnostic Physicians Group physicians, in violation of the Stark Law and Anti-Kickback Statute. IMC-Diagnostic and Medical Clinic is owned by Infirmary Medical Clinics, a subsidiary of Infirmary Health System, also based in Mobile.

“Financial arrangements that compensate physicians for referrals encourage physicians to make decisions based on financial gain rather than patient needs,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division. “The Department of Justice is committed to preventing illegal financial relationships that corrupt the integrity of our public health programs.”

Enforcement of the Stark Law and the Anti-Kickback Statute is intended to ensure that physicians’ medical judgment is not compromised by improper financial incentives. The Stark Law forbids a clinic or hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the entity. The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of services or items covered by federal health care programs, including Medicare. The lawsuit alleges that the IMC-Diagnostic and Medical Clinic improperly paid Diagnostic Physicians Group physicians compensation that included a percentage of the money collected from Medicare for tests and procedures the doctors referred to the clinic. These improper payments and resulting submission of false claims to the Medicare program violated the Stark Law and Anti-Kickback Statute.

“The Stark Law and Anti-Kickback Statute were enacted to prevent financial ties from influencing the level of care provided to patients,” said Kenyen Brown, U.S. Attorney for the Southern District of Alabama. “By bringing cases such as this one against Infirmary Health System, we hope to ensure that precious health care resources are not wasted due to improper financial relationships among health care providers.”

The lawsuit was filed in July 2011 by former Diagnostic Physicians Group physician Dr. Christian Heesch, under the qui tam, or whistleblower, provisions of the False Claims Act, which authorize private parties to sue on behalf of the U.S. and receive a portion of any recovery. The act also permits the government to intervene and take over a lawsuit, as it has done in this case.

The government’s intervention in this lawsuit illustrates its emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $14.7 billion through False Claims Act cases, with more than $10.7 billion of that amount recovered in cases involving fraud against federal health care programs.

The government’s investigation has been a coordinated effort by the Department of Justice, Civil Division, Commercial Litigation Branch; the U.S. Attorney’s Office for the Southern District of Alabama; the Department of Health and Human Services Office of Inspector General; and the FBI. The government has 30 days to file and serve a superseding complaint in this matter.

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