Health System, Affiliates Pay $14.1 Million to Resolve False Claims Act Allegations

The U.S. Department of Justice announced a settlement agreement involving Adventist Health System/West (Adventist), dba Adventist Health, and its affiliated hospital White Memorial Medical Center (White Memorial), for improper physician inducements and referrals.

Adventist agreed to pay $14.1 million to settle claims that it violated the False Claims Act by improperly compensating physicians who referred patients to the White Memorial facility by transferring assets, including medical and non-medical supplies and inventory at below fair market value. In addition to the impermissible transfer of assets, the government alleged that White Memorial violated anti-kickback laws by paying referring physicians above fair market value to provide teaching services at its family practice residency program. The federal government alleged that these payments violated the Anti-Kickback Act and Stark Law, and the False Claims Act. As part of the settlement, White Memorial entered into a comprehensive five-year Corporate Integrity Agreement with the Office of Inspector General.

White Memorial is part of Adventist Health in Roseville, Calif., which runs 19 hospitals and more than 150 clinics in California, Oregon, Hawaii and Washington.

The Anti-Kickback Act prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare or other federally-funded programs. Stark prohibits a hospital from submitting claims for patient referrals made by a physician with whom the hospital has an improper financial arrangement.

Approximately $11.5 million of the settlement will be paid to the federal government; the remaining $2.6 million will be paid to California’s Department of Health Care Services.

In addition, the announced settlement resolves a lawsuit filed in the Eastern District of California under the qui tam, or whistleblower, provisions of the False Claims Act. Two physicians who reported the kickbacks and referrals will collectively receive over $2.8 million of the recovery. The lawsuit is captioned U.S. ex rel. Hector Luque et al. v. Adventist Health et al., No. 2:08CV1271 (E.D. Cal.).