Michigan Hospital System Beaumont Health to Pay $84.5 Million to Settle Allegations of Fraud

On August 2, 2018, the Department of Justice announced that William Beaumont Hospital– a Detroit, Michigan-based hospital system – has agreed to pay $84.5 million to settle allegations that it violated the False Claims Act due to improper relationships with eight referring physicians.  The allegations claimed that the improper relationships resulted in the submission of false claims to Medicare, Medicaid and TRICARE programs. Of this $84.5 million settlement, $82.74 million will go to the federal government and the remaining $1.76 million will go to the state of Michigan.

This settlement resolves four separate lawsuits that were each brought by employees or former employees of the hospital.  These lawsuits were brought under the qui tam, or whistleblower provisions, of the False Claims Act.  The qui tam provisions of the False Claims Act allow whistleblowers – also referred to as “relators” – with knowledge of fraud against the government to file a civil case on behalf of the United States. Under the Act, the government can join and proceed with the lawsuit, and in this case, the government did so. When the government joins and proceeds with the lawsuit, the whistleblower, or in this case, whistleblowers, who originally brought suit under the Act will receive 15-25% of the federal government’s recovery. Therefore, the four relators that brought these respective cases will collectively receive 15-25% of the $82.74 million recovered by the United States.

One the qui tam lawsuits was filed by Dr. David Felten, Beaumont’s Vice President of research. According to the Department of Justice, Dr. Felten discovered that, between 2004 and 2012, physicians received kickbacks from the hospital system in exchange for patient referrals. Specifically, the hospital system provided physicians with excessive pay and low-cost or free office space in exchange for patient referrals. As a result, the hospital system violated the Anti-Kickback Statue and Stark Law. The hospital system then violated the False Claims Act by submitting claims for the illegally referred patients.

The federal Anti-Kickback Statute – 42 U.S.C. 1320(a)-7b – prohibits the exchange (or offer to exchange), of anything of value, in an effort to induce (or reward) the referral of federal healthcare program business. The purpose of Anti-Kickback Statute is, in-part, to ensure that patients receive the best care possible. According to Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division, “offering financial incentives to physicians in return for patient referrals undermines the integrity of our health care system… patients deserve the unfettered, independent judgement of their health care professionals.”

In other words, the idea behind the Anti-Kickback Statute is: if a physician makes a patient referral based on the incentives she may receive, the physician’s referral is tainted, and as a result, the physician’s patient may not receive the proper care needed.

Frohsin Barger & Walthall would like to thank and congratulate the U.S. Attorney’s Office for the Eastern District of Michigan, the Department of Justice Civil Division’s Commercial Litigation Branch, and the State of Michigan Attorney General’s Office for investigating this case and achieving this settlement.  As well, Frohsin Barger & Walthall would like to thank and congratulate the brave relators and their counsel, Blanchard & Walker, PLLC of Ann Arbor Michigan; Vezina Law PLC of Birmingham, Michigan; Morganroth and Morganroth of Birmingham, Michigan and Bracker & Marcus, LLC of Marietta, Georgia, for bringing this matter to the government’s attention.

To read the full Department of Justice Press Release click here.

For more information about the False Claims Act, click here.