On April 21, 2015, the Department of Justice (DOJ) announced that Citizens Medical Center (CMC) a county-own hospital located in Victoria, Texas agreed to pay the Government a settlement of $21.75 million to resolve claims that it violated the Stark law and the False Claims Act (FCA) by allegedly paying kickbacks to doctors for patient referrals. The Stark law prohibits hospitals from having certain types of financial relationship with physicians that refer patients.  This restriction helps to eliminate fraud so that the best interest of the patient is considered over profit.  However, the government alleges that CMC not only entered into unlawful financial relationships with referring physicians, but also compensated a number of doctors above fair market value for their services.

According to a lawsuit filed by three whistleblowers, Dakshesh “Kumar” Parikh, Harish Chandna and Ajay Gaalla, under the qui tam provisions of the False Claims Act, CMC allegedly paid several cardiologists that overcharged their patients the fair market values of their services.  In addition, CMC also paid bonuses to emergency room physicians who also overcharged patients for their services.  This type of practice is considered health care fraud and is a violation of the Stark law and the FCA, compromises the health and well-being of the patients, and causes undue financial burdens on taxpayers — especially when the government is billed for illegal health care claims.

This type of illegal practice between hospital and health care provider continues to be investigated by the Justice Department.  Just recently, two cardiovascular disease testing laboratories based in Virginia and California agreed to pay the government $48.5 million for allegedly paying inducements to physicians for referring patients to its laboratories for testing.  In February 2015, a pharmaceutical manufacturer headquartered in Delaware, agreed to pay the U.S. government $7.9 million for allegedly offering kickback incentives to a drug management company, in exchange for selling its pharmaceutical products.  These lawsuits were originally filed by whistleblowers.

The whistleblowers provision of the FCA was designed to prevent fraud on the government, and is one of the most effective methods that the government has implemented for combating fraud. Under the FCA, any person, who knows of an individual or company that has defrauded the federal government, can file a “qui tam” lawsuit to recover damages on the government’s behalf. Additionally, a whistleblower who files a case against a company that has committed fraud against the government, may receive an award of up to 30 percent of the settlement.