On November 26, 2019, the Department of Justice (DOJ) announced a $26.67 million settlement with a laboratory testing corporation, Boston Heart Diagnostics Corporation (Boston Heart). The settlement resolves allegations of False Claims Act (FCA) violations related to alleged payments for patient referrals in violation of the Anti-Kickback Statute (AKS) and the Physician Self-Referral Law (PSR Law) – commonly known as the Stark Law – and other improper billing.

The AKS prohibits remuneration intended to induce referrals for items or services covered by federal healthcare programs. The PSR Law prohibits billing federal healthcare programs for certain items and services referred by physicians with whom there is a financial relationship. Under the FCA, claims that violate the AKS or PSR Law may be false claims. The FCA makes submission of such false claims unlawful.

The settlement resolves allegations that Boston Heart paid kickbacks disguised as investment returns to physicians. The announcement describes allegations that Boston Heart agreed to provide laboratory services to hospitals in exchange for per-test payments. Per the DOJ, in order to generate more referrals, Boston Heart allegedly worked with the hospitals’ marketers to set up management service organizations “to make payments to referring physicians that were disguised as investment returns but were actually based on, and offered in exchange for, the physicians’ referrals.” These payments were allegedly designed to induce more referrals to the hospitals for laboratory tests performed by Boston Heart, and then billed to federal healthcare programs.

Additionally, the settlement resolves allegations that Boston Heart and the hospitals conspired to submit claims for outpatient laboratory testing for patients who were not actually hospital outpatients. Per the DOJ, this allegedly occurred in order to receive higher reimbursements from federal healthcare programs.

Lastly, the settlement resolves allegations that Boston Heart “paid processing and handling fees, waived patient copayments and deductibles, and provided physician practices with in-office dietitians in exchange for physician referrals for laboratory testing.” These allegations initially occurred in qui tam actions brought by whistleblowers on behalf of the United States as permitted by the FCA.

This settlement is yet another example of the DOJ’s scrutiny of remuneration to providers. The DOJ continues to pursue allegations of improper remuneration by intervening in whistleblower suits under the FCA. The settlement made no determination of liability.

This post was co-authored by Michael Lisitano, legal intern at Robinson+Cole. Michael is not yet admitted to practice law.