Continuing a trend we reported in January 2014, the U.S. Department of Justice announced another multi-million dollar settlement of alleged False Claims Act (“FCA”) violations.  In this case, Halifax Hospital Medical Center and Halifax Staffing, Inc. (collectively “Halifax”) agreed to pay $85 million to resolve allegations that they violated the False Claims Act by submitting claims to Medicare that violated the Stark Law.  United States ex rel. Baklid-Kunz v. Halifax Hospital Medical Center, et al., No. 09-cv-1002 (M.D. Fla.).

Halifax entered into contracts with six medical oncologists that included payment of incentive bonuses to the physicians.  The Government alleged that Halifax knowingly violated the Stark Law when they executed these contracts because the incentive bonus improperly included the value of payment for referrals made by the physicians.  The Stark Law prohibits physicians from referring their Medicare and Medicaid patients to business entities with which they have a financial relationship, including a compensation arrangement.  The Government also alleged that Halifax knowingly violated the Stark Law by paying three neurosurgeons more than the fair market value of their work.

The settlement resolves the qui tam lawsuit filed by Halifax’s Director of Physician Services in 2009, in which she alleged violations of the False Claims Act, the Stark Law, and the federal Anti-Kickback Statute.  She will receive $20.8 million of the settlement proceeds.

Halifax did not admit liability as part of the settlement, but in a November 13, 2013 ruling, the U.S. District Court for the Middle District of Florida held that the contracts with the medical oncologists violated the Stark Law because the incentive bonus provision in the contracts did not fit within the bona fide employment relationship exception to the Stark Law’s prohibition on receiving payment for referrals.  This was the case because the bonus was based on factors in addition to services performed personally by the physicians.  As part of the settlement, Halifax also agreed to enter into a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General, which reportedly obligates Halifax to undertake internal compliance reforms and submit its federal health care program claims to independent review for the next five years.