Texas Hospital Settles False Claims Act and Stark Law Case

According to the Department of Justice, Citizens Medical Center (“Citizens”) located in Victoria, Texas has agreed to pay $21.75 million to settle a qui tam case brought by three whistleblowers alleging violations of the False Claims Act and the Stark Law. In addition to Citizens, the whistleblowers named the hospital’s administrator, David Brown, and a cardiologist employed by Citizens, William Campbell Jr., as individual Defendants.

According to Citizens’ website, it is a 344-bed acute care hospital, specializing in cardiac care, providing services to Victoria and all of South Texas. The whistleblowers are three cardiologists who formerly had privileges at Citizens until they resigned in December 2012.

The whistleblowers’ complaint alleged that the hospital paid compensation to cardiac physicians that exceeded the fair market value of their services and paid improper bonuses to various physicians that were based, in part, on the value of their referral of patients for cardiac services. The government claims, these payments were made in violation of the Anti-Kickback Statute, the Stark Law, and the False Claims Act.

According to the three whistleblowers, Drs. Dakshesh Parikh, Harish Chandna, and Ajay Gaalla, beginning in 2007, the hospital began to retaliate against them when they refused to participate in the alleged schemes. In August 2010, the relators initiated the whistleblower lawsuit under the qui tam provision of the False Claims Act.

The complaint contains allegations that Citizens’ payments to physicians in return for referrals of patients to the hospital resulted in the submission of false claims to Medicare and Medicaid in violation of the Anti-Kickback Statute and the Stark Law. Specifically, the relators alleged that various physician groups including ER physicians, urologists, gastroenterologists, hospitalists, and cardiologists entered into agreements under which they received additional compensation or benefits in exchange for referring patients to Citizens.

The whistleblowers will share in $5.9 million of the settlement proceeds as their reward under the qui tam provisions of the False Claims Act.