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Justice News

Department of Justice
U.S. Attorney’s Office
Northern District of California

Friday, November 15, 2019

California Health Group And Surgical Group Agree To Settle Claims Arising From Improper Compensation Arrangements

SAN FRANCISCO – Several hospitals owned and operated by Sutter Health (“Sutter”), a California-based healthcare services provider, and Sacramento Cardiovascular Surgeons Medical Group, Inc. (“Sac Cardio”), a practice group of three cardiovascular surgeons, have agreed to pay the United States a total of $46,123,516.36 to resolve allegations related to reimbursement claims they submitted to the Medicare program, the Department of Justice announced today.

The Physician Self Referral Law, commonly known as 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 decisions are not influenced by improper financial incentives.

As part of the settlements announced today, one of Sutter’s hospitals, Sutter Memorial Center Sacramento (“SMCS”), has agreed to pay $30.5 million to resolve allegations that, from 2012 to 2014, it violated the Stark Law by billing Medicare for services referred by Sac Cardio physicians, to whom it paid amounts under a series of compensation arrangements that exceeded the fair market value of the services provided.  Relatedly, Sac Cardio has agreed to pay $506,000 to resolve allegations that it improperly submitted duplicative bills to Medicare for services performed by physician assistants that it was leasing to SMCS under one of those compensation arrangements.

“Improper financial arrangements between hospitals and physicians can influence the type and amount of health care that is provided,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “The Department is committed to taking action to eliminate improper inducements that can corrupt the integrity of physician decision-making.”

“Medical decisions should be based on the best interests of the patient, not improper financial incentives.  In this case, the Stark Law is being enforced to ensure that Medicare recipients and other beneficiaries of federal health care programs receive care untainted by prohibited financial incentives,” said David L. Anderson, United States Attorney for the Northern District of California.  

Separately, Sutter has agreed to pay $15,117,516.36 to resolve other conduct that the company itself disclosed to the United States, principally concerning additional violations of the Stark Law.  Specifically, Sutter hospitals submitted Medicare claims that resulted from referrals by physicians to whom those 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 United States Attorney McGregor Scott.  “This office is committed to pursuing enforcement actions that will ensure the integrity of federal health care programs.”

The allegations relating to SMCS and Sac Cardio were originally brought by Laurie Hanvey in a lawsuit filed under the whistleblower provisions of the False Claims Act, which allow private parties to bring suit on behalf of the federal government and to share in any recovery.  The whistleblower will receive $5,891,140 as her share of the federal government’s recovery in this case.  

These matters were handled on behalf of the government by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Northern District of California, and the U.S. Attorney’s Office for the Eastern District of California.  Investigative support was provided by the Department of Health and Human Services’ Office of the Inspector General.

The claims resolved by these settlements are allegations only and there has been no determination of liability.

Updated November 15, 2019