California hospital will pay more than $3 million over allegations it violated physician self-referral law

The Justice Department has announced a multi-million dollar settlement with Tri-City Medical Center in Oceanside, California, that resolves allegations it violated Medicare's prohibition on financial relationships between hospitals and referring physicians. The hospital has agreed to pay $3,278,464.

The Stark Law restricts hospitals from billing Medicare for particular services referred by physicians who have a "financial relationship" with the hospital, unless the relationship falls under a specific exemption. Those exceptions usually require that those types of arrangements don't exceed "fair market value" or take into account the volume or price tag of those referrals. Also, Stark requires any agreements or arrangements with doctors who aren't hospital employees must be detailed in writing and be subject to a number of other requirements, said the DOJ.

The settlement, which was announced Friday, resolves allegations of wrong-doing with respect to the Stark Law and False Claims Act. Specifically, the Department of Justice said Tri-City maintained 97 financial arrangements with physicians or physician groups that violated Stark. Five of them were identified by the hospital as arrangements with the Chief of Staff from 2008 to 2011 that did not appear to be "commercially reasonable or for fair market value," authorities said.

Additionally, the other 92 relationships with community-based doctors or groups from 2009 to 2010, also identified by the hospital, failed to comply with the Stark Law for various reasons including, but not limited to the following: the written agreements were missing information such as signatures; were missing outright; or were expired, according to the DOJ.

"Patient referrals should be based on a physician's medical judgment and a patient's medical needs, not on a physician's financial interests or a hospital's business goals," said U. S. Attorney Laura E. Duffy of the Southern District of California. "This settlement reinforces that hospitals will face consequences when they enter into financial arrangements with physicians that do not comply with the law. We will continue to hold health care providers accountable when they shirk their legal responsibilities to the detriment of taxpayer-funded healthcare programs."