The U.S. Department of Justice is asking for Halifax Health to pay between $350 million and $600 million in damages and penalties in a lawsuit accusing the hospital of defrauding Medicare through illegal contracts with physicians.
Elin Baklid-Kunz, a Halifax Health employee, brought a suit in 2009 accusing Halifax Health of illegal kickbacks to doctors, improper admissions and unnecessary spinal surgeries. The Justice Department joined the case in 2011 in support of some of the allegations.
In a motion for partial summary judgment filed last week, the Justice Department asked for $102.8 million in damages and an additional $250 million to $500 million in penalties.
Halifax Health, a 678-bed public hospital system, denies all of the allegations and filed its own round of legal briefs last week asking for summary judgment in its favor.
“We are going to say zero, and they are going to say whatever they want to say,” Halifax Health CEO Jeff Feasel said when asked Monday about potential damages for the hospital.
A Justice Department spokesman could not comment about the case Monday.
The eye-popping figures requested by the Justice Department could result in the largest judgment ever in a whistleblower suit of its kind, said Marlan Wilbanks, an attorney for Baklid-Kunz.
“There has to be a huge punishment for cheating the government,” said Marlan Wilbanks, an attorney for Baklid-Kunz. ”If you didn’t have that, the system would be in worse shape than it is now. If Halifax is wrong and the government and (Baklid-Kunz) are right, they’ve got huge problems at Halifax.”
The government’s claims for damages stem from an alleged violation of the Stark Law, which prohibits Medicare and Medicaid payments for hospital services that are prescribed by doctors who have profit-sharing agreements with the hospital.
The Department of Justice alleges Halifax Health knowingly violated the Stark Law from the 2005 to 2009 by entering into employment agreements with six medical oncologists that compensated them based on the operating margin of the hospital’s oncology program. The Justice Department says the hospital knowingly submitted thousands of false claims resulting in millions of dollars in payments.
“Halifax’s actions are exactly what the Stark Law was enacted to prevent: physicians basing referral decisions on financial gain rather than a patient’s best interests,” the Justice Department wrote in its motion filed in federal court in Orlando.
The Halifax Health Board of Commissioners met Monday evening behind closed doors to discuss legal strategies. The consensus of the board was to defend all of the allegations, said Dave Davidson, general counsel for Halifax Health.
“We think all the contracts were valid, and we are going to defend it,” Davidson said.
In its filing, Halifax Health’s attorneys argued the financial agreements were all above board because of an exception in the Stark Law.
Halifax Health wrote in its motion the government is not “entitled to the draconian fines and penalties it demands for its hyper-technical reading of the Stark Law.” The case is set for trial in November.
Baklid-Kunz filed her action under a federal law that allows her to recoup 15 to 25 percent of damages.
Similar claims involving kickback violations have resulted in significant damages for other hospitals. In 2010, the Health Alliance of Cincinnati agreed to pay $108 million to settle claims that it engaged in an illegal kickback scheme, according to a Department of Justice news release.
The suit comes at a time when Halifax Health is looking to merge with 112-bed Bert Fish Medical Center in New Smyrna Beach and add outpatient services in Deltona and Ormond Beach.
HMA, a for-profit provider based in Naples, is also looking to merge with Bert Fish. The Justice Department is investigating HMA amid allegations it improperly admitted patients to boost profits.
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