The U.S. Department of Justice settled a whistleblower lawsuit for $17 million. The suit claimed that Lexington Medical Center (LMC) paid kickbacks to physicians in return for referrals. Kickbacks have long been illegal when federal or state healthcare dollars are involved. As part of the settlement, Dr. David Hammett, a former LMC physician, should receive $4.5 million for being the whistleblower who first reported the scheme.
Hammett’s Complaint Against LMC
Lexington Medical Center is 400+ bed hospital on the outskirts of Columbia, South Carolina. The hospital employs approximately 600 physicians. Until he was fired in 2013, Hammett worked as a neurologist for the hospital.
When he was first hired in 2011, Hammett had “absolute discretion” as to where to send patients for ancillary services. If a patient did not have insurance, he would often send them to a nearby imaging center for MRIs. The private center charged less than the hospital. According to Dr. Hammett, he did what was in the best interest of the patient, even if that wasn’t in the best interest of the hospital profits.
Shortly after being hired, Hammett says he began to feel pressure to order more tests for patients and to order them through LMC. Hammett says he liked the fact that LMC had imaging equipment on campus but at times, it was better for the patient to go outside. He claims that the hospital’s administration suggested that his high salary from the hospital was predicated on the hospital making money from ancillary testing and services such as imaging.
When Hammett balked and refused to send more patients to the hospital for testing, he claims he was suddenly fired.
After his termination, Dr. Hammett fell on hard times. His non-compete clause with the hospital preventing him from practicing in the area. Feeling that LMC’s actions were illegal, Hammett filed a whistleblower lawsuit under the False Claims Act.
Last month the federal government joined Hammett’s lawsuit. The case then settled with Lexington Medical Center agreeing to pay $17 million and enter into a corporate integrity agreement to insure there are no future violations. The hospital did not have to admit any wrongdoing. According to a story carried by The State, a hospital spokesperson said, “The settlement, in which Lexington Medical Center expressly denied any wrongdoing, allowed the medical center to avoid continued costly litigation that could have lasted for several years.”
False Claims Act and Kickbacks
Kickbacks are illegal in the healthcare industry. If a provider such as a hospital is receiving Medicare, VA, Tricare or Medicaid funds, it can’t engage in kickbacks. Gone are the days of hospitals offering cash for patient referrals. Instead, today we see hospitals “paying” for patients by offering doctors phony research grants, medical directorships or in this case, above market salaries. That makes proving the bribe or kickback harder.
Dr. Hammett claimed that the hospital violated federal and state kickback laws in several ways. According to his complaint,
“First, LMC’s physician compensation is objectively unreasonable as it far exceeds the fair market value of the services these physicians are performing and fails to comply with any regulatory safe harbor… Second, LMC’s compensation scheme takes into account the volume or value of patient referrals physicians are expected to make pursuant to the hospital’s de facto mandatory referral policy. Third, LMC paid [certain doctors] a post-closing bonus never included in the acquisition contract and not bargained for as part of the value of the practice; a kickback designed to reward [the doctors] for future referrals.”
Paying or receiving kickbacks may violate the federal Stark Act or Anti Kickback Statute or both. A violation of either of these laws is also a violation of the federal False Claims Act. The latter is an 1863 Civil War era law that pays whistleblowers awards for reporting fraud against government programs.
Congress made kickbacks illegal in the hope that medical decisions always be based on a patient’s best interests and not that of the provider. We call that concept “patients before profits.”
False Claims Act and Whistleblower Awards
As noted earlier, the False Claims Act pays generous cash awards to those who first blow the whistle. For Medicare violations, that award is up to 30% of whatever the wrongdoer must pay. In this case, we expect Dr. Hammett to receive a $4.5 million award.
Twenty-nine states and the District of Columbia have state Medicaid fraud laws that also pay awards. Unfortunately, South Carolina is not one of those states.
To qualify for an award, one must have original source information about fraud involving federal healthcare dollars. (Other government spending qualifies too.) Generally awards are only paid to the first insider filing a complaint in federal court.
Many people choose to report healthcare fraud through a government hotline. Unfortunately, information reported this way generally only qualifies for a maximum $1000 award. If you hope to receive a whistleblower award like Dr. Hammett, you must hire a lawyer and file a sealed complaint in court.
MahanyLaw – The “Go To” Lawyers for Claiming a Whistleblower Award
MahanyLaw is a nationally recognized whistleblower law firm that has helped clients recover over $100 million in awards. We never charge for our services unless you actually recover money.
Our whistleblower lawyers will handle the filing of the complaint and subsequent prosecution. We will also protect you if you are the victim of retaliation. (Whistleblower retaliation is illegal in all 50 states and territories.)
Need more information? All consultations are protected by the attorney – client privilege and kept completely confidential. For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct). You can also visit our Medicare fraud whistleblower page and read dozens of more stories on our text searchable blog.
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