BRADENTON, Fla. - Florida-based Adventist Health System agreed to pay a record $118.7 million to settle allegations that it had physician referral agreements that violated the federal False Claims Act.
The AHS Sunbelt system will pay $115 million to settle the federal claims while paying $3.5 million to Florida, $198,453 to North Carolina, $66,897 to Tennessee, and $4,711 to Texas.
The settlement resolves allegations that Adventist submitted false claims to Medicare and Medicaid for services rendered to patients referred by employed physicians who received bonuses based on a formula that improperly took into account the value of the physicians' referrals to Adventist hospitals, the Justice Department said announcing the agreement late Monday.
"Unlawful financial arrangements between heath care providers and their referral sources raise concerns about physician independence and objectivity,"
The agreement will settle the allegations without determining liability, according to federal officials.
Adventist said in a statement that the agreement with the government concerned "alleged and unintentional" violations of the complex federal Stark Law and other issues.
"The settlement fully resolves issues AHS voluntarily disclosed to the United States government in early 2013 involving its implementation of certain physician employment compensation models and highly technical physician billing and coding issues," the statement said. "Adventist Health System regrets these oversights."
AHS said a review of system performance did not identify any negative impacts on the quality, safety or individual cost of patient care at hospitals or clinics, and measures have been implemented to ensure compliance with regulations in the future.
The settlement also resolved allegations from two lawsuits filed by whistleblowers who worked at Adventist's hospital in Hendersonville, N.C., and at AHS's corporate office. The Justice Department said the amount of compensation to the whistleblowers has not been determined.
Adventist Health System, which is headquartered in Altamonte Springs near Orlando, operates 44 hospitals in 10 states. The system had about $3.2 billion of outstanding debt as of Dec. 31.
In July, Standard & Poor's revised AHS's outlook to positive from stable while affirming its AA-minus long-term rating.
S&P said the positive outlook reflected the system's "continued strong" operating and financial performance.
Fitch Ratings assigns its AA rating to Adventist's long-term debt, while Moody's Investors Service assigns Aa2 ratings.
AHS's settlement is the largest of its kind outside of a trial, and follows last week's announcement that the North Broward Hospital District in Florida paid $69.5 million to settle similar claims, according to the law firm Phillips & Cohen, which represented whistleblowers in the Adventist case.
"We alleged Adventist's hospitals paid doctors outrageous sums and offered overly generous benefits and lax billing oversight as part of a corporate strategy to capture and control physician referrals for inpatient and outpatient services near its hospitals," Phillips & Cohen attorney
"This tactic was intended to increase the number of Medicare, Medicaid and other patients sent to Adventist hospitals for inpatient and outpatient treatment and boost the hospital's revenues," Chatfield said.
Tuomey Healthcare System in Sumter, S.C., is facing a larger $237 million judgment relating to False Claims act violations, after years of litigation through the courts. In July, a federal appeals court upheld the judgment.
In recent market notices, Tuomey said that it is conducting settlement negotiations with the Justice Department. It also expects to finalize a binding definitive partnership agreement by Oct. 1 with Palmetto Health, which is part of the Baptist Healthcare System.
