Hospital pays $12.5M to resolve kickback allegations

The Cooper Health System in Newark, NJ, has agreed with the U.S. Attorney’s Office for the District of New Jersey and the state of New Jersey to pay $12.6 million to settle allegations that it violated the federal False Claims Act and New Jersey False Claims Act by making improper payments to physicians under so-called “consulting” and “compensation” agreements as it sought to build its cardiology program.

U.S. Attorney Paul J. Fishman, JD, and colleagues announced the settlement.

“Payments to outside physicians by hospitals require heightened scrutiny because those payments may be improper if they are based on patient referrals,” Fishman said. “Such kickback arrangements interfere with the physician-patient relationship and can lead to problems of overutilization and increased costs. Federal healthcare participants, such as Cooper, who run afoul of the prohibitions against kickbacks must be held responsible.”

The United States and New Jersey contend that from Oct. 1, 2004, through Dec. 31, 2010, Cooper recruited local outside physicians to serve on the Cooper Heart Institute Advisory Board (CHIAB). Physicians were paid about $18,000 a year to attend four meetings annually. The United States and New Jersey allege that at least one purpose of these payments was to induce the referral of patients to Cooper, that the payments did, in fact, induce such referrals to Cooper, and that Cooper’s subsequent billing of the Medicare and Medicaid programs for services resulting from those tainted referrals were in violation of federal and state anti-kickback and self-referral laws and thus, false claims.

The civil settlement agreement is between:

  • the United States of America — acting through the United States Attorney’s Office for the District of New Jersey and on behalf of the Office of Inspector General of the United States Department of Health and Human Services (HHS OIG);
  • the state of New Jersey;
  • the Cooper Health System.

In resolution of the federal and state civil claims, Cooper has agreed to pay $10.2 million to the United States and $2.3 million to the state of New Jersey. Cooper has further enacted and agreed to maintain several corporate reforms designed to enhance accountability, training, and other aspects of its compliance operations.

The settlement resolves a False Claims Act suit by a physician who was recruited to take part in the CHIAB, but, instead, recognizing its potentially unlawful purpose, demurred and filed a whistleblower — “qui tam” — action. The qui tam provisions of the federal and state False Claims Acts permit private individuals, known as relators, to file such actions and share in a portion of the proceeds recovered. The full settlement agreement is online at http://tinyurl.com/CooperSettlement.

Cooper University Hospital issued a statement saying, “After more than three years of extended discussions with government lawyers, we decided, in the best interests of Cooper, to settle our dispute without the admission of wrongdoing to avoid the burdens and uncertainties of a protracted litigation. This allows us to focus our full energies on serving our community.”