Rialto Capital Management and Current Owner of Indiana Hospital to Pay $3.6 Million to Resolve False Claims Act Allegations Arising From Kickbacks to Referring Physicians
The Department of Justice announced today that Rialto Capital Management LLC (Rialto) and its former affiliate RL BB-IN KRE LLC (RL BB) have agreed to pay $3.6 million to resolve allegations that Rialto and the Kentuckiana Medical Center (KMC), a Clarksville, Indiana-based hospital owned by RL BB, violated the Anti-Kickback Statute (AKS), the Stark Law, and the False Claims Act by engaging in illegal financial arrangements with two doctors who referred patients to KMC. Until November 2018, RL BB was an affiliate of Rialto, which oversaw management of the hospital.
“When doctors refer patients for tests and medical procedures, they must do so based on their own professional judgment and the medical needs of their patients, not personal financial benefits,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “Illegal financial arrangements between health care providers undermine the integrity of our health care system, and we will continue to pursue those who engage in such conduct.”
The settlement resolves allegations that KMC, under the direction of Rialto, provided personal loans to two referring doctors and then repeatedly forbore from requiring repayment of those loans. The United States alleged that the hospital’s failure to collect on loans to key referral sources constituted a form of remuneration prohibited by both the AKS and the Stark Law. The AKS prohibits the provision of remuneration to induce the referral of services or items that are paid for by a federal health care program. The Stark Law restricts financial relationships that hospitals may enter into with physicians who refer patients to them. The False Claims Act prohibits the submission of claims to Medicare for items or services that are tainted by financial arrangements that violate the AKS or the Stark Law.
“The Anti-Kickback Statute, Stark Law, and False Claims Act were created to serve as tools for combating fraud, waste, and abuse in federally funded health care programs,” said U.S. Attorney for the Southern District of Indiana Josh Minkler. “This recovery sends the message that health care providers must comply with applicable state and federal laws when billing the United States Government for services, or they will face consequences.”
Rialto, through RL BB, acquired KMC as part of KMC’s bankruptcy reorganization in 2013. As part of that reorganization, KMC and Rialto initially offered to award partial ownership in the hospital’s real estate to certain physicians who had been important referral sources for KMC, but those offers were challenged in the bankruptcy proceedings. Instead, Rialto approved personal loans from KMC to two of the hospital’s key referral sources, and Rialto and KMC then allegedly repeatedly forbore from requiring repayment of those loans for more than two years after each loan matured and became due in full.
“Healthcare entities need to ensure that financial arrangements with physicians are clear and appropriate,” said Lamont Pugh III, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services (OIG). “The practice of providing any kind of remuneration in exchange for the referral of Medicare patients is a violation of the Anti-Kickback Statute. OIG will continue to examine and investigate those relationships that violate federal statutes in an effort to protect vital taxpayer dollars.”
The settlement resolves a lawsuit filed in federal court by Dr. Abdul Buridi under the qui tam or whistleblower provisions of the False Claims Act, which permit private parties to bring lawsuits on behalf of the United States for false claims and to share in any recovery. Dr. Buridi will receive $612,000 from the settlement.
The United States’ investigation of this matter was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Southern District of Indiana, and the U.S. Department of Health and Human Services Office of Inspector General.
The claims resolved by the settlement are allegations only, and there has been no determination of liability. The case is captioned United States ex rel. Buridi v. Kentuckiana Medical Center LLC, et al., Case No. 4:15-cv-014 (S.D. Ind.)