BRADENTON, Fla. — Halifax Hospital Medical Center in Florida will pay a $1 million settlement, plus $10.9 million in legal costs to close out a federal case involving false claims and Medicare overbilling.

The payments won't violate additional bond covenants, the Daytona Beach-based Medical Center said in a notice to bondholders posted on the Municipal Securities Rulemaking Board's EMMA website Aug. 6.

The most recent payments totaling $11.9 million are on top of an $85 million settlement in March that did violate covenants.

Halifax, a public health system on the state's east coast, paid $85 million to the Department of Justice in March after a federal judge ruled that contracts between Halifax and its medical oncologists violated the Stark Law.

The Stark Law forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital.

In addition to the $85 million, the hospital entered a corporate integrity agreement, obligating itself to undertake certain reforms and to have federal health care claims reviewed for the next five years.

The Stark Law violation caused Halifax to violate its bond covenants under the master trust indenture. The settlement payment also violated covenants relating to debt service coverage ratios.

The health system had $342.1 million of outstanding bonds at the end of fiscal 2013.

In response to the $85 million payment, Fitch Ratings in March downgraded Halifax's ratings to BBB from BBB-plus, and placed the new rating on "watch negative."

Fitch said the lower rating was due to the health system's "reduced unrestricted liquidity position" in addition to modest profitability and elevated leverage.

Standard & Poor's also lowered its ratings in March to BBB-plus from A-minus due to lower liquidity, and said the outlook is stable.

The most recent payments were related to claims made by Elin Baklid-Kunz, a former hospital employee and whistleblower, who said that the hospital admitted patients without justification and overbilled Medicare by $82.2 million.

Halifax agreed to pay $5.4 million for Baklid-Kunz's attorney's fees and costs, according to the material event notice on EMMA.

Without admitting it did anything wrong, the hospital paid the DOJ another $1 million to settle claims regarding the medical necessity of admissions. Halifax also agreed to pay the DOJ $4.5 million for legal fees and costs.

Halifax is a full-service and accredited acute care hospital licensed to operate 764 beds. It owns three inpatient hospitals and several ambulatory facilities.

 

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