AJC Watchdog: First Alert

Keeping watch on those who hold the public trust and money

Hospitals to pay $118 million on accusations of paying doctors for referring patients

Adventist Health System has agreed to pay $118.7 million to settle whistle-blower lawsuits that accused the hospital chain of making illegal payments to doctors in exchange for referrals.

Florida-based Adventist Health has 44 hospitals in 10 states, including 2 in Georgia.

Adventist paid bonuses to doctors based on a formula that "improperly took into account the value of the physicians' referrals to Adventists hospitals," the U.S. Justice Department said Monday.

Atlanta attorney Marlan Wilbanks, one of the whistle-blower attorneys in the case, said the amount is believed to be the largest settlement ever under the False Claims Act based on violations of the federal Stark law. The law sets limits on the financial relationships between hospitals and doctors who refer patients for care.

“Adventist-owned hospitals, such as Park Ridge, allegedly paid doctors’ bonuses based on the number of tests and procedures they ordered,” said Acting U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina.  “This type of financial incentive is not only prohibited by law, but can undermine patients’ medical care.  Would-be violators should take notice that my office will use the False Claims Act to prevent and pursue health care providers that threaten the integrity of our healthcare system and waste taxpayer dollars.”

The settlement covered allegations made in two whistle-blower lawsuits. One was filed by three employees who worked at an Adventist hospital in Hendersonville, North Carolina. The other was filed by Sherry Dorsey, a corporate vice president who joined Adventist in 2012.

"Ms. Dorsey was unwilling to stick her head in the sand and ignore the illegal schemes that impacted hundreds of physicians across the United States who were illegally paid to generate government money for Adventist," said Wilbanks, who represented Dorsey.

Adventist will pay $115 million to the United States. The hospital chain will pay another $3.7 million to four states: Florida, North Carolina, Tennessee and Texas.

In a statement, Adventist Health System characterized the violations as "alleged and unintentional."

"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 health system said. "An AHS review did not identify any negative impacts on the quality, safety or individual cost of patient care at AHS hospitals or clinics."

The Justice Department said  the claims settled by the agreement are allegations only and there has been no determination of liability.

"Adventist Health System regrets these oversights, and while some of its hospitals had no violations, the organization has improved monitoring and business practices system-wide as a result of lessons learned from this experience so that it can continue to uphold the highest standards of compliance with regulations," the system said.

Whistle-blowers can earn a share of any settlement, but the amount in this case has not yet been determined, according to the Justice Department.

The two Adventist hospitals in Georgia are Gordon Hospital in Calhoun and Murray Medical Center in Chatsworth.

“Unlawful financial arrangements between heath care providers and their referral sources raise concerns about physician independence and objectivity,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, in a statement.  “Patients are entitled to be sure that the care they receive is based on their actual medical needs rather than the financial interests of their physician.”

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About the Author

Carrie Teegardin is on the investigative team. She is a graduate of Duke University and has won numerous national journalism awards.