Stark Law and False Claims Act: Hospital Incurs $237M Penalty for Violations

March 24, 2014 | Health System Risk Management


​A U.S. district court in South Carolina denied a defendant hospital's motion for a new trial, finding that the healthcare system violated both the Stark law and the False Claims Act based on evidence showing a relationship between physician compensation and the volume or value of the physician referrals, as well as evidence that the healthcare system took into account the volume or value of the referrals when determining compensation. A jury had rendered a verdict in favor of the United States and imposed a civil penalty of $237,454,195 for 21,730 false claims.

In 2002, the healthcare system and a competitor applied for certificates of need for an ambulatory surgery center (ASC) (the healthcare system later changed its application to an outpatient surgery center OSC), which were approved. The healthcare facility then estimated that it would lose $9.6 million over 13 years if gastroenterologists performed their endoscopies at competitor facilities. This estimate was based on a study showing that 80%...

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