EnforceMintz — 2024’s Key False Claims Act Settlements Involving Hospitals and Health Systems: Continued Focus on Stark Law and Anti-Kickback Statute Violations

In 2024, the Department of Justice (DOJ) resolved several noteworthy False Claims Act (FCA) cases against hospitals and health systems. In particular, DOJ obtained a number of large recoveries in cases where Stark Law and federal Anti-Kickback Statute (AKS) violations served as a predicate for FCA claims. Moreover, DOJ sued a major nonprofit health system for alleged systemic Stark Law and FCA violations involving excessive physician compensation (see our prior post here). DOJ also obtained significant settlements involving FCA allegations involving false or fraudulent health care billing and coding practices, a long-standing focus of DOJ and an ongoing compliance challenge for hospitals.

For many years, some of DOJ’s largest FCA recoveries have involved cases against hospitals and health systems, including nonprofits, investor-owned entities, and teaching, specialty, and community-based facilities. We anticipate that the trends identified above — triggered by ever-active qui tam whistleblowers, DOJ, and other agency-initiated cases, and more incentives for disclosures by providers — will continue in 2025, even under new DOJ leadership.

FCA Settlements Based on Stark Law and AKS Violations

Continuing the trend we noted in 2023 (see our prior post here), purported Stark Law and AKS violations by hospitals and health systems represent some of 2024’s most significant FCA settlements. As described below, these cases often involve the alleged improper provision of something of value to referring physicians, which allegedly leads to the ordering of medically unnecessary services and increased federal health care program costs. These cases underscore the need for hospitals and health systems to conduct comprehensive legal and compliance reviews of physician and other referring practitioner compensation arrangements.

• ChristianaCare. In January 2024, ChristianaCare, a Delaware-based health system, agreed to pay $42.5 million to resolve Stark Law and AKS allegations related to a global billing arrangement with a private neonatology practice. The government’s investigation was triggered by a qui tam case filed by the health system’s former chief compliance officer. DOJ alleged that the health system violated the AKS and Stark Law by providing free support to the neonatology practice from nurse practitioners, hospitalists, and physician assistants for all care provided in the hospital’s neonatal unit. The neonatology practice, in turn, billed globally for all services provided in the hospital. The government alleged that this arrangement involved illegal remuneration to the private neonatology practice because the ChristianaCare providers, in fact, provided most of the professional care and conducted most of the procedures in the hospital’s neonatal intensive care unit, but the private neonatology practice billed and was reimbursed for that care. This arrangement was allegedly intended to induce referrals from the neonatology practice. This settlement is a reminder of the government’s intensive scrutiny under the Stark Law and AKS of the business relationships between health systems and their referring physicians.
• Methodist Le Bonheur Healthcare. In January 2024,  Methodist Le Bonheur Healthcare, a Memphis-based health system, entered into a civil settlement with DOJ to resolve FCA claims related to its multi-agreement affiliation with an oncology practice under which the practice managed the health system’s oncology service line. The investigation was triggered by a qui tam case filed by the former president of Methodist University Hospital and a former dean of the University of Tennessee Health Science Center. DOJ alleged that these agreements were structured as a lucrative deal for physicians based on the value of the physicians’ referrals, including referrals for chemotherapy and cancer drugs and the resulting profits available under the 340B program. Methodist Le Bonheur Healthcare agreed to pay $7.25 million to settle the allegations.
• New York Presbyterian Hospital. In March 2024, New York-Presbyterian/Brooklyn Methodist Hospital, an acute care nonprofit community and teaching hospital, and an affiliated professional corporation agreed to pay $17.3 million to resolve allegations under the FCA and the New York False Claims Act. DOJ alleged that the hospital’s contractual arrangements with physicians at a chemotherapy infusion center improperly paid compensation to physicians based on the number of referrals the physicians made to the infusion center. The settlement also resolved claims that physicians at the infusion center failed to adequately supervise chemotherapy services. The hospital voluntarily self-disclosed the issues, which led to a federal settlement amount of approximately 1.5 times the alleged loss to the United States from the conduct, demonstrating the value of self-disclosure given that FCA liability can result in treble damages.
• Dunes Surgical Hospital. In September 2024, Siouxland Surgery Center LLP, d/b/a Dunes Surgical Hospital, agreed to pay $12.76 million to resolve FCA allegations that it violated the AKS and Stark Law by (i) providing free and below fair market value clinic space, supplies, and employees to an anesthesia practice; and (ii) making significant financial contributions ($300,000-$375,000 per year) to a nonprofit affiliate of a referring physician group, which were used in part to pay the salaries of athletic trainers who generated referrals for both the hospital and the physician group. Of note, the Dunes Surgical Hospital voluntarily disclosed the conduct at issue through the OIG’s Self-Disclosure Protocol after an internal compliance review. Accordingly, Dunes Surgical Hospital received cooperation credit from the government for its voluntary disclosure, which resulted in a settlement amount with a reduced damages multiplier of 1.5 times the alleged losses.
• Oroville Hospital. In December 2024, Oroville Hospital, a community hospital in Northern California, agreed to pay $10.25 million to the federal government and the State of California and to enter into a five-year corporate integrity agreement (CIA). The allegations included payment of kickbacks in the form of bonuses to admitting physicians based on the volume of patients the physicians admitted as inpatients. Further, the government alleged that the physician payments incentivized medically unnecessary inpatient admissions when observation status or outpatient care was medically appropriate. Lastly, the hospital allegedly submitted claims that included false diagnosis codes for systemic inflammatory response syndrome. All of the conduct allegedly resulted in medically unnecessary inpatient admissions and inflated costs to Medicare and Medicaid. The claims were brought by two whistleblowers, a physician who worked at the hospital and a repeat relator with seemingly no connection with the hospital, but who appears to have brought similar lawsuits against four other hospitals.

FCA Settlements Involving Medicare Billing and Coding Rules

As described below, FCA investigations and settlements of alleged Medicare billing and coding errors remain a key part of federal health care enforcement activity. These investigations often involve false claims allegations based on upcoding, services not rendered or properly documented, and/or lack of medical necessity or noncompliance with Medicare’s coverage criteria. Given these settlements and the Supreme Court’s determination that “knowledge” under the FCA is subjective (see our prior post here), hospitals and health systems will be well-served by continuing to ensure that medical record documentation is rigorous and supports Medicare billing and coding, that they maintain an effective audit program, and that they contemporaneously document advice from counsel, consultants, and communications with payors.

• Silver Lake Hospital. In January 2024, Silver Lake Hospital, a long-term acute care hospital in Newark, New Jersey, and its investors agreed to pay approximately $30.6 million and entered into a CIA to resolve FCA allegations for claiming excessive Medicare inpatient cost outlier payments. Medicare pays cost outlier payments to hospitals when the cost of inpatient care is significantly more expensive than expected under the diagnostic related group (or DRG) payment system. The hospital agreed to pay $18.6 million over a five-year period to resolve FCA allegations. In addition, its investors agreed to pay $12 million over a five-year period to resolve allegations that they violated the Federal Debt Collection Procedures Act by transferring funds from the hospital to the investors without paying the equivalent value in return when they realized that the hospital would not be able to repay its debts to the Medicare program. The settlement amount was negotiated based on the hospital’s inability to pay and characterized in the settlement agreement as restitution.
• Penn State Health. In February 2024, Penn State Health agreed to pay $11.7 million to resolve allegations that it submitted claims to Medicare for annual wellness visits that were not supported by medical records. Penn State voluntarily disclosed the matter and took prompt corrective action, according to DOJ’s press release. This settlement serves as an important reminder that hospitals and health systems should have processes in place to ensure that services provided are sufficiently documented in the medical record.
• Cape Cod Hospital. In May 2024, Cape Cod Hospital, a not-for-profit hospital, agreed to pay $24.3 million and entered into a CIA to resolve allegations that it billed Medicare for transcatheter aortic valve replacement (TAVR) procedures that did not comply with Medicare rules under a National Coverage Determination. At the time of the conduct at issue, Medicare required hospitals to engage specified clinicians to conduct an independent examination of patients to evaluate their suitability for TAVR procedures, document the rationale, and make their rationale available to the medical team performing the TAVR procedure. Cape Cod Hospital admitted in the settlement agreement that it had submitted claims that failed to satisfy these requirements either because not enough clinicians examined the patient to evaluate their suitability for the procedure or because the clinicians failed to document and share their rationale with the medical team. DOJ’s investigation was triggered by a qui tam complaint filed by a former interventional cardiologist employed by the hospital. The hospital had conducted an internal investigation of its TAVR claims, which resulted in the hospital making a voluntary refund for four claims. However, the settlement described the internal review and voluntary refund in detail as incomplete. Nevertheless, the settlement credited the hospital for its disclosure and cooperation, which was reflected in a settlement amount that was approximately 1.73 times the amount of the alleged loss to the United States.

DOJ enforcement under the FCA against all types of hospitals and health systems — nonprofit, investor-owned, teaching, specialty, and community-based — continued to be vigorous in 2024. The resolutions related to these matters offer some key reminders for stakeholders, including (i) the need for a thorough legal review of physician compensation arrangements, (ii) the importance of rigorous documentation in the medical record, and (iii) the value of internal reviews, self-disclosure, and cooperation with the government to minimize the impact of FCA liability. These settlements also serve as yet another reminder that employees, including knowledgeable high-level executives and referring physicians, often are qui tam whistleblowers in cases that lead to FCA settlements.

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