Centra Health, Blue Ridge ENT agree to pay nearly $10M settlement in lawsuit involving allegations of improper financial relationships

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LYNCHBURG, Va. (WFXR) — The U.S. Department of Justice (DOJ) announced Wednesday that Centra Health Inc. and Blue Ridge Ear, Nose, Throat and Plastic Surgery, Inc. agreed to pay the government almost $10 million to settle claims alleging they engaged in improper financial relationships.

According to a news release from the DOJ and the U.S. Attorney’s Office for the Western District of Virginia on Wednesday, April 22, Centra and Blue Ridge ENT will pay $9,345,845 in settlement costs for allegations of violating the False Claims Act and the Virginia Fraud Against Taxpayers Act.

The statement says the settlement involved financial relationships between Centra and its affiliates and several referring health care providers, including Blue Ridge ENT. Officials say such relationships violate the Stark Law, the Anti-Kickback Law, and other federal regulations restricting potential financial relationships between hospitals and physicians who refer patients to them.

“Health care cases continue to be a top priority in our office,” First Assistant U.S. Attorney Bubar said Wednesday. “Improper financial relationships between hospitals and their referral sources can compromise a physician’s medical judgment, increase health care costs, threaten the integrity of the healthcare system, and endanger the public’s trust. The settlement announced today reflects not only our willingness to work with our community partners who review their own practices and make appropriate self-disclosures, but also the importance of our False Claims Act whistleblower provisions that encourage private citizens to contribute to our efforts to identify and eliminate fraud.”

Centra proactively came forward, reported its violations of the False Claims Act, and cooperated with the government to resolve the issues, according to the DOJ. In particular, officials say Centra identified recruitment agreements with physicians who already relocated to southern or central Virginia, physician employee compensation arrangements accounting for the value of referrals for in-office laboratory tests, financial arrangements made with physicians without a written and executed contract, and agreements with trauma call coverage physicians and an oncology practice that did not satisfy any exception to the Stark Law.

“Centra and its affiliated hospitals stepped up and self-disclosed their improper relationships with physician groups, including blatant violations of the Stark self-dealing law, compensation for referrals, and problematic physician recruitment agreements,” said Maureen R. Dixon, Special Agent in Charge of the Office of Inspector General for the U.S. Department of Health and Human Services.  “We will continue working closely with our State and Federal partners to protect the integrity of government health programs.”   

Wednesday’s news release says Blue Ridge ENT allegedly had a financial relationship with Centra that guaranteed income to one of its physicians through Centra’s agreement to reimburse Blue Ridge ENT for extra incremental costs attributed to that physician. However, according to officials, Blue Ridge ENT knowingly claimed and received more reimbursement than allowed by Stark Law and the Anti-Kickback Law.

According to the DOJ, a former Blue Ridge ENT physician filed a lawsuit with these allegations under the qui tam provisions of the False Claims Act, which allow private individuals to sue on behalf of the government and receive a share of any settlement. On the other hand, officials say the False Claims Act also allows the government to intervene and take control of the whistleblower’s suit while still allotting a share of the settlement to the individual.

“This settlement sends a strong message that improper financial relationships between hospitals and their referral sources will not be tolerated in Virginia,” said Attorney General Mark Herring. “When a hospital enters into an improper financial relationship with their referral sources it could not only harm the care a patient receives but it also undermines the integrity of the whole health care system. I want to thank our local and federal partners as well as my Medicaid Fraud Control Unit for their hard work and collaboration on this case.”

The DOJ says Sara Bugbee Winn, Assistant United States Attorney at the U.S. Attorney’s Office for Western District of Virginia; Christina K. McGarvey, Senior Counsel for the Office of Inspector General of the Department of Health and Human Services; and Kimberly M. Bolton, Assistant Attorney General in the Virginia Attorney General’s Medicaid Fraud Control Unit handled the case.

However, officials say there has been no determination of liability and that the claims settled by this agreement are only allegations.

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