The Office of Inspector General (OIG) recently announced that three physician-owned companies entered into a $7.3 million Civil Monetary Penalty (CMP) settlement agreement to settle allegations that they violated the anti-kickback laws by soliciting and receiving payments from hospitals in exchange for patient referrals. The three companies – United Shockwave Services, United Prostate Centers, and United Urology Centers (collectively, "United") are based in the Chicago area and provide hospitals with lithotripsy and laser services and equipment.
According to the OIG, a number of United's physician-investors stated or implied that they would treat laser and lithotripsy patients at other hospitals if hospital administrators did not contract with United for the services. The OIG investigation was spurred by a competitor's complaint. The OIG also alleged that United caused certain of these hospitals to submit claims for designated health services that resulted from prohibited referrals in violation of the Stark law.
In addition to the CMP settlement, United also entered into a five-year Corporate Integrity Agreement, pursuant to which it is required to hire an Independent Review Organization (IRO). The IRO will be responsible for monitoring any lithotripsy and laser arrangements between United and any hospital in Illinois, Iowa, and Indiana that receives referrals from United or its physician investors. Also as part of this process, United is required to provide a comprehensive training program to educate its employees and corporate members on Stark law and kickback issues.
Highlighting the government's increased scrutiny of these arrangements, Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services said, "[t]his settlement sends a strong message that companies, including those with physician-owners, cannot use Federal health care beneficiary referrals to line their pockets by securing business from hospitals or other providers." He added, "[w]e continue to have concerns when companies link investment opportunities to the ability to generate business and offer returns on investment that are disproportionate to business risk."
This settlement does not mean that relationships between hospitals and physician-owned companies are not permissible, but simply emphasizes the importance of ensuring that the strategies and operations of any such companies are aligned with the requirements of the healthcare regulatory framework. For more information, please contact Kim Harvey Looney or any member of Waller Lansden's Healthcare practice at 800-487-6380.
The opinions expressed in this bulletin are intended for general guidance only. They are not intended as recommendations for specific situations. As always, readers should consult a qualified attorney for specific legal guidance.