California Health System Agrees to Pay over $15M to Settle Claims Arising from Improper Compensation Arrangements and Double Billing

SACRAMENTO, Calif. — Sutter Health has agreed to pay $15,117,516 to resolve conduct concerning violations of the Physician Self-Referral Law, commonly known as the Stark Law, as well as double-billing for certain services, U.S. Attorney McGregor W. Scott announced today.

The Stark Law prohibits a hospital from billing Medicare for certain services referred by physicians with whom the hospital has a financial relationship, unless that relationship satisfies one of the law’s statutory or regulatory exceptions. The law is intended to ensure that medical decision-making is not influenced by improper financial incentives and is instead based on the best interests of the patient.

The conduct at issue was self-disclosed by Sutter to the United States, and includes submission of claims to Medicare that resulted from referrals by physicians to whom certain Sutter hospitals: (1) paid compensation under personal services arrangements that exceeded the fair market value of the services provided; (2) leased office space at below-market rates; and (3) paid reimbursements of physician-recruitment expenses that exceeded the actual recruitment expenses at issue. Additionally, several Sutter ambulatory surgical centers double-billed the Medicare program by submitting claims that included radiological services for which Medicare separately paid another entity that had performed those services.

“Providers must rigorously comply with the law and Medicare requirements” said U.S. Attorney Scott. “This office is committed to pursuing enforcement actions that will ensure the integrity of federal health care programs.”

This settlement is the result of work by the U.S. Attorney’s Office for the Eastern District of California with help from the Department of Health and Human Services, Office of Inspector General. Assistant U.S. Attorney Catherine J. Swann handled the matter for the United States. The claims settled by this agreement are allegations only, and there has been no determination of liability.