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August 23, 2012

Department of Justice

United States Attorney William C. Killian Eastern District of Tennessee


United States Reaches Settlement With Memorial Health Care System

CHATTANOOGA, Tenn. - The United States has reached a settlement with Memorial Health Care System, Inc. (Memorial), the nonprofit corporation that operates Memorial Hospital in Chattanooga, Tenn., and Memorial Hixson Hospital (formerly known as Memorial North Park Hospital) in Hixson, Tenn. As part of the settlement, Memorial agreed to pay $1,278,579 to settle alleged violations of the federal False Claims Act and other federal laws and regulations.

The settlement agreement alleges that, beginning as early as January 2003, Memorial entered into a series of financial arrangements with certain physicians and physician groups through which it provided financial benefits intended to induce physicians to refer patients to Memorial facilities. These arrangements violated federal laws known as the Ethics in Patients Referrals Act (or the “Stark law”) and the Anti-Kickback Statute and resulted in the submission of false claims to the Medicare system. U.S. Attorney William C. Killian explained that these laws are intended to protect patients by ensuring that physicians make patient referral decisions based on the patients’ best interests without being influenced by payments or financial benefits received from hospitals competing for their business. In addition, these laws are designed to protect the integrity of government-funded health care benefit programs. Federal law prohibits hospitals from submitting claims to government-funded health care benefit programs such as Medicare for inpatient and outpatient hospital services referred, ordered, or arranged for by physicians who have prohibited financial arrangements with those hospitals.

“Health care fraud and abuse has been and continues to be a major point of emphasis for the Justice Department and this Office,” said U.S. Attorney Killian. “We will continue to enforce the Ethics in Patient Referrals Act and to protect the Medicare trust fund.”

U.S. Attorney Killian noted that this settlement resulted from a comprehensive investigation that began in early 2009 and was a joint effort of the U.S. Attorney’s Office for the Eastern District of Tennessee; the U.S. Department of Justice; and the Department of Health and Human Services - Office of Inspector General (HHS-OIG). After the investigation began, but before being specifically notified of it, Memorial contacted government officials to report that it had discovered potential Stark law and anti-kickback statute violations. Soon afterward, Memorial learned of and began cooperating with the government’s investigation. Memorial has denied any intentional wrongdoing in agreeing to the settlement. The investigation did not involve or reveal patient quality of care concerns.

"This is an excellent example of how a health care provider can self-report billing concerns to the Government and avoid costly false claims litigation," said Derrick L. Jackson, Special Agent in Charge at the HHS-OIG in Atlanta. “The OIG welcomes the opportunity to work with providers to resolve issues such as this and return money back to the Medicare Trust Fund."

U.S. Attorney Killian commended the cooperative efforts of all who played a role in this complex investigation, and in particular lead HHS-OIG Special Agent Bob Turner, and AUSAs Rob McConkey and Betsy Tonkin. Mr. Killian also expressed appreciation for the assistance of DOJ Senior Counsel Laurie Oberembt and HHS-OIG Senior Counsel Katie Fink.

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