WASHINGTON—HealthSouth Corporation and two physicians have agreed to pay the United States a total of $14.9 million to settle allegations that the Birmingham, Ala.-based company submitted false claims to the government and paid illegal kickbacks to physicians who referred patients for care in some of its hospitals, outpatient rehabilitation clinics, and ambulatory surgery centers, the Justice Department announced today.
HealthSouth will pay $14.2 million, and the physicians will pay a total of $700,000 under separate settlement agreements. HealthSouth, currently the nation’s largest provider of inpatient rehabilitation services, was also one of the largest providers of outpatient rehabilitation services, ambulatory surgery services, and diagnostic imaging services until it sold those lines of business earlier this year.
Today’s settlement results from disclosures made by HealthSouth in 2004 and 2005 to the U.S. Attorney for the Northern District of Alabama, Alice Martin, and the Department of Health and Human Services’ Office of Inspector General, after a change in management and an internal investigation. The government’s investigation was jointly handled by the U.S. Attorney’s Office for the Northern District of Alabama, the U.S. Attorney’s Office for the Central District of California, the Civil Division of the Department of Justice, the Department of Health and Human Services, Office of Inspector General, and the FBI.
The settlement resolves claims made by HealthSouth to Medicare and Medicaid for services provided to patients referred by orthopedic surgeons Drs. James Andrews and Lawrence Lemak of Birmingham, when HealthSouth had financial relationships with the physicians, their former partnership, the Alabama Sports Medicine and Orthopaedic Clinic, and their research and training foundation, the American Sports Medicine Institute, that violated the Medicare and Medicaid Anti-Kickback Statute and a provision of the Social Security Act commonly known as the Stark Law. Alice Martin, the U.S. Attorney for the Northern District of Alabama, said that her office has entered into a $450,000 settlement with Dr. Andrews and a $250,000 settlement with Dr. Lemak resolving the government’s claims against them.
The HealthSouth settlement also resolves allegations that the company paid kickbacks to, and entered into improper financial relationships with, other physicians, including a group in Los Angeles, in an apparent attempt to induce the referral of patients. The government’s investigation of certain of the other physicians is continuing.
“Hidden financial agreements between healthcare providers and physicians may influence where patients receive treatment, and what treatment is received,” said Jeffrey S. Bucholtz, Acting Assistant Attorney General for the Justice Department’s Civil Division. “Medicare beneficiaries deserve their physicians’ unbiased judgment regarding their treatment, free of improper financial influences. Today’s settlement sends a loud message to healthcare providers that we will strongly enforce the Anti-Kickback Statute and the Stark Law to deter such conduct.”
U.S. Alice Martin added, “Former HealthSouth management’s improper financial relationships were made known to us through self-disclosures by new management. To preserve the independence of health care providers it is critical that business relationships not violate the Anti-Kickback Statute, the Stark law, and the False Claims Act.”
Thomas P. O’Brien, U.S. Attorney for the Central District of California, said, “We will not be fooled when healthcare providers attempt to disguise kickbacks as cleverly crafted business arrangements. Medicare providers seeking federal funds must play by the rules. Providing sweet deals to physician groups to insure a steady stream of referrals runs afoul of those rules and will not be tolerated.”
As a condition of continued participation in government healthcare programs, the Office of Inspector General of the Department of Health and Human Services required HealthSouth to amend its existing Corporate Integrity Agreement to address kickback issues. “This settlement reflects the Office of Inspector General’s resolve to hold responsible those who seek to influence the judgment of physicians through improper financial arrangements,” said Daniel R. Levinson, Inspector General for the Department of Health and Human Services. “It should be a reminder that Federal health care program beneficiaries’ referrals should be based on quality of care for the patient, not the financial benefit for any individual or company.”
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07-1007