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Legal & Regulatory Feature

Pine Creek Medical Center / Courtesy of Pine Creek Medical Center

Physician-Owned Hospital Pays $7.5 Million False Claims Settlement

Walter Eisner • Wed, February 14th, 2018

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The feds accused Pine Creek Medical Center LLC, a physician-owned hospital in Dallas, Texas, of paying physicians kickbacks in the form of marketing services in exchange for surgical referrals.

According to a December Department of Justice press release, the hospital agreed to pay the feds $7.5 million to resolve claims that the hospital violated the False Claims Act with the kickbacks.

According to the government, between 2009 and 2014, the hospital engaged in an “illegal kickback scheme whereby the hospital would pay for marketing and/or advertising services on physicians’ behalf and, in return, the physicians would refer their patients, including Medicare and TRICARE beneficiaries, to Pine Creek.”

“The hospital allegedly paid for advertisements on behalf of the physicians in several local and regional publications. The government said Pine Creek also allegedly paid for radio and television advertising, pay-per-click advertising campaigns, billboards, website upgrades, brochures, and business cards, as well as other forms of marketing "to induce physicians to refer patients to Pine Creek for medical services.”

“As part of the settlement, the hospital has agreed to enter into a corporate integrity agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG), which obligates the defendants to undertake "substantial internal compliance reforms for the next five years."

$1.125 Million to Whistleblowers

The case came to the attention of the feds after a lawsuit was filed by whistleblowers under the qui tam provisions of the False Claims Act. The whistleblowers, Suzanne Scott and Savannah Sogar, former employees of Pine Creek’s marketing department, received $1,125,000.

The lawsuit is captioned U.S. ex rel. Suzanne Scott, et al. v. Pine Creek Medical Center, LLC, Case No. 3:14-cv-3065 (N.D. Tex.). The government noted that the claims settled by the agreement are allegations only; "there has been no determination of liability."

“Hospitals that try to boost their profits by paying kickbacks to physicians will instead pay for their improper conduct,” said Special Agent in Charge C.J. Porter, Department of Health and Human Services, Office of Inspector General’s Dallas Region. “We will continue to investigate such illegal business arrangements that undermine impartial medical judgment.”

The hospital was built in 2005 as a short-stay hospital. Today, the hospital is staffed by 170 physicians representing all specialties. According to the U.S. News & World Report 2017-2018 rankings, the hospital’s performance was rated below average for hip replacements and average for knee replacements.

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