Freeman Health System to Pay $9.3 million Due to Alleged Stark Violations

Freeman Health System, located in Joplin, Missouri, has agreed to pay more than $9.3 million to settle allegations that it paid unlawful compensation to physicians for patient referrals, the Justice Department has announced. The federal government investigated the matter after Freeman disclosed that its compensation arrangements with physicians may have taken into account the revenue generated by their referrals for diagnostic testing and other services. The 70 physicians were employees of Freeman’s clinics.

The Stark Law bars physician referrals for health care services to entities in which they have a financial interest. The financial interest may be an ownership interest, but also may include a variety of other arrangements in which the physician’s compensation depends in part upon the volume of referrals for services funded by federal government programs or the revenue generated by the referrals. These incentives lead to medically unnecessary services and waste federal dollars.

Claims submitted by entities that are out of compliance with the Stark Law also violate the False Claims Act because of the certification of compliance required as part of every claim. The False Claims Act has been a major component of the efforts of the government’s fraud detection and prevention activities, particularly those of the Health Care Fraud Prevention and Action Team (HEAT), a partnership between the Department of Justice and the Department of HHS that began in early 2009. The Justice Department has used the False Claims Act to recover $10.1 billion in health care fraud claims since January, 2009.

The U.S. Attorney for the Western District of Missouri, the Civil Division of the Department of Justice, the HHS Office of Inspector General, and the FBI handled the investigation and settlement. There has been no finding of liability.