Church Hospital and Health System Settle Anti-Kickback Claims for $3.85 Million

A Butte, Montana hospital and its Denver parent company have agreed to pay $3.85 million to the U.S. Department of Justice (DoJ) to settle alleged violations of the Stark and Anti-Kickback laws and related claims under the False Claims Act. According to the DoJ announcement, St. James Healthcare (St. James) and its parent company, Sisters of Charity of Leavenworth Health System (Sisters of Charity) self-disclosed violations involving improper payments to and financial relationships with physicians and physician practice groups that encouraged referrals of patients to the hospital.

Federal Prohibitions

The Anti-Kickback Law prohibits any form of remuneration for the referral of patients for federally funded health care services. The Stark law bars physicians from referring such patients to facilities in which they have a financial interest. Because providers certify compliance with these laws with every claim for federal payment, violations of the Stark and/or Anti-Kickback laws, such claims also violate the False Claims Act.

The Financial Arrangements

The alleged illegalities involved a set of intertwined financial arrangements. St. James entered into a joint venture with the physicians and practice groups to operate a medical office building on the St. James campus. St. James and Sisters of Charity admitted that they: (1) leased the land for the building at rates below fair market value (FMV); (2) paid incentives to the joint venture that increased the value of the shared owned by the physicians and practice groups, reducing their effective rents paid for office space below FMV; and (3) charged rates below FMV for services related to the use and maintenance of the building.

Self-Referral Disclosure

According to the announcement, St. James and Sisters of Charity voluntarily disclosed the arrangements to the DoJ using the self-referral disclosure protocol (SRDP). The SRDP is an enforcement tool added by section 6409 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). However, the settlement does not constitute an admission of liability.