Northern Ohio Health System Agrees to Pay Over $21 Million to Resolve False Claims Act Allegations for Improper Payments to Referring Physicians

Akron General Health System (AGHS), a regional hospital system based in Akron, Ohio, will pay $21.25 million to resolve allegations under the False Claims Act of improper relationships with certain referring physicians, resulting in the submission of false claims to the Medicare program. AGHS was acquired at the end of 2015 by the Cleveland Clinic Foundation (Clinic) through a full member substitution agreement.

This settlement resolves allegations that between August 2010 and March 2016, AGHS paid compensation substantially in excess of fair market value to area physician groups to secure their referrals of patients, in violation of the Anti-Kickback Statute and the Physician Self-Referral Law, and then submitted claims for services provided to these illegally referred patients, in violation of the False Claims Act. The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid and other federally funded programs.

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 an improper financial arrangement, including the payment of compensation that exceeds the fair market value of the services actually provided by the physician. The Clinic voluntarily disclosed to the government its concerns with these compensation arrangements, which were put in place by AGHS’s prior leadership, and received credit for its cooperation in the resolution reached by the parties.

“Improper payments to physicians for referrals threaten the integrity of our health care system and deprive patients of the independent medical decision making that they deserve,” said Acting Assistant Attorney General Brian M. Boynton of the Justice Department’s Civil Division. “The Justice Department is committed to upholding these important interests and to pursuing providers who engage in improper financial arrangements.”

“Medical decisions should be made with a patient’s best interest in mind rather than an illegal financial agreement,” said Acting U.S. Attorney Bridget M. Brennan for the Northern District of Ohio. “This office is committed to taking appropriate action to ensure the integrity of federal healthcare programs.”

“Physicians must make referrals and other medical decisions based on what is best for patients, not to serve profit-boosting business arrangements,” said Special Agent in Charge Lamont Pugh III of HHS-OIG. “Working closely with our law enforcement partners, we will continue to protect taxpayer-funded federal health care programs as well as patients.”

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