Mercy Springfield will pay $34 million to settle claims of improper payments to oncologists

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WASHINGTON, D.C. - Two health care providers from Springfield, Mo., agreed to pay the United States $34 million to settle allegations that they violated the False Claims Act by engaging in improper financial relationships with referring physicians.

You can read the 13-page settlement document in the right margin of this report.

The two defendants are Mercy Hospital Springfield, formerly known as St. John’s Regional Health Center, and its affiliate, Mercy Clinic Springfield Communities, formerly known as St. John’s Clinic. They operate a hospital, doctors' offices, and infusion center in Springfield.

The settlement announced on Thursday resolved allegations that the Defendants submitted false claims to the Medicare Program for chemotherapy services rendered to patients referred by oncologists whose compensation was based in part on a formula that improperly took into account the value of their referrals of patients to the infusion center operated by the Defendants. Federal law restricts the financial relationships that hospitals and clinics may have with doctors who refer patients to them.

“When physicians are rewarded financially for referring patients to hospitals or other health care providers, it can affect their medical judgment, resulting in over-utilization of services that drives up health care costs for everyone,” said Acting Assistant Attorney General Chad Readler of the Justice Department’s Civil Division. “In addition to yielding a recovery for taxpayers, this settlement should deter similar conduct in the future and help make health care more affordable.”

The allegations settled on Thursday arose from a lawsuit filed by a whistleblower, Dr. Viran Roger Holden, a physician who was employed by one of the Defendants, under the qui tam provisions of the False Claims Act. Under the act, private citizens can bring suit on behalf of the government for false claims and share in any recovery. Dr. Holden will receive $5,440,000 from the recovery.

“This settlement protects patients and the public by enforcing the federal protections against profit incentives for physicians,” said Acting U.S. Attorney Thomas M. Larson for the Western District of Missouri. “Patients deserve assurances that they are receiving appropriate medical care, unbiased by hidden incentives. And taxpayers deserve assurances that the cost of public health care programs is not inflated by unnecessary procedures and services.”

“When physician compensation improperly accounts for referrals, patients are left to wonder whether their doctor’s judgment has been tainted and motivated by financial interests,” said Special Agent in Charge Steven Hanson for the Department of Health and Human Services Office of the Inspector General. “Illegal financial reward has no place in health care. Today’s settlement should send a message that, together with our law enforcement partners, we will pursue these cases.”

The government’s intervention/complaint in this matter illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Tips from all sources about potential fraud, waste, abuse, and mismanagement can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).

The case, United States ex rel. Holden v. Mercy Hospital Springfield, et al., Case No. 15-cv-3283 (W.D. Mo.), was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Western District of Missouri, and the U.S. Department of Health and Human Services’ Office of Inspector General. The claims settled by this agreement are allegations only, and there has been no determination of liability.

Mercy provided this response to the settlement:

Mercy Hospital Springfield and Mercy Clinic Springfield Communities recently agreed to a settlement with the U.S. Department of Justice (DOJ) and the Office of Inspector General of the U.S. Department of Health & Human Services (OIG) to resolve a lawsuit related to physician compensation.

Specifically, the lawsuit involves how physicians were paid for their work in the Mercy Hospital Infusion Center between 2009 and 2014. The physicians who worked in the infusion center did nothing wrong, and all patients received services that were medically necessary and were billed appropriately for the care they received. The same high standards of care were in place both before and after the infusion center changed from being clinic-based to hospital-based.

The settlement amount, which was based on a portion of the infusion center’s revenue during that five-year period, is $34 million. Mercy has been in discussions with the DOJ on this matter for many months and was able to plan for this expense and set aside the necessary funds for this settlement during the last fiscal year, so that it will not have an impact on current fiscal year finances and operations.

As part of the settlement, Mercy Hospital Springfield and Mercy Clinic Springfield Communities also signed a Corporate Integrity Agreement with the OIG. This five-year agreement requires Mercy to conduct enhanced training and education, perform regular internal reviews and policy and procedure updates, and implement more rigorous governance oversight structure related to physician contracting and compensation practices.

The background of the issue is as follows:

* Prior to 2009, Mercy’s infusion center was part of Mercy Clinic. That year, the decision was made to transfer the center to Mercy Hospital Springfield in order to be eligible to participate in a federal drug pricing program, providing significant cost reductions for expensive chemotherapy drugs that benefit our cancer patients.

* Mercy Clinic continued to operate the infusion center under a management agreement with the hospital, and the hospital paid the clinic for these management services. The clinic then paid the oncologists for their services based on their work in the infusion center. The mistake occurred when the clinic paid the physicians in a manner determined by the DOJ to be a technical violation of federal law.

* The regulations regarding physician billing practices are very complex, and in settling the lawsuit the DOJ acknowledged that Mercy did not intentionally violate the law. These were regulatory issues, not patient care issues. Even though they are commonly labeled as fraud and abuse laws, the government investigation did not find any intentional wrongdoing or fraud at Mercy and the settlement we reached with the government dismisses all allegations of fraud. In addition, Mercy changed the way physicians are paid three years ago as part of an internal assessment of physician compensation practices.

“We take this situation very seriously. We made a regulatory mistake and we are working hard to make it right,” said Jon Swope, regional president of Mercy Central Communities. “Our efforts today are focused on continuing to maintain a more rigorous audit and compliance program, including developing the plan to implement the new Corporate Integrity Agreement. Just as we are committed to the highest levels of health care quality and safety, we also are committed to ensuring that we comply with all the technical aspects of the laws involving physician compensation.”

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