In the midst of growing regulatory scrutiny regarding fraud and abuse, regulatory agencies are increasingly pursuing physicians, individually, under fraud and abuse laws. In United States ex rel. Williams v. Banks-Jackson-Commerce Hosp. & Nursing Home Auth., a case stemming from the complaint of a relator (i.e., a private citizen) in the small community of Commerce, Georgia, a physician agreed to pay $200,000 to the U.S. to settle allegations regarding improper kickbacks in violation of the False Claims Act (FCA), Stark Law, and Anti-Kickback Statute (AKS).¹ While the settlement agreement, which was executed on September 22, 2014, led to the lawsuit’s dismissal,² the announcement of the agreement is yet another sign of federal regulatory authorities utilizing a new tactic to boldly pursue fraud and abuse lawsuits, whereby individual physicians who receive improper payments may be liable under federal fraud and abuse laws.³ This approach could drastically alter the relationship between healthcare entities and physicians who provide medical services for the entity, as physicians will be increasingly incentivized to closely adhere to fraud and abuse statutes and regulations.

As mentioned in a December 2013 Health Capital Topics article, entitled “Emboldened Pursuit of Healthcare Fraud and Abuse,” the Department of Justice (DOJ) and the Office of Inspector General (OIG) are increasingly using their authority through the AKS, Stark Law, and FCA to combat healthcare fraud and abuse.⁴ The AKS imposes criminal liability on persons who “knowingly and willfully” receive, solicit, offer, or pay remuneration for the exchange of a patient referral payable by a federal healthcare program.⁵ The Stark Law prohibits the submission of claims to federal healthcare programs when a physician or immediate family member refers Medicare or Medicaid patients to an entity for a designated health service when that physician has a financial relationship with that entity.⁶ Finally, the FCA imposes civil liability on persons who knowingly present a false or fraudulent claim for payment to the U.S.⁷ Utilizing these authorities, the DOJ and OIG recouped over $2.6 billion in improper payments under Federal healthcare programs in 2013,⁸ an increase over the $1.0 billion collected in 2008.⁹  Federal regulatory bodies have utilized initiatives such as the Healthcare Fraud Prevention and Enforcement Action Team (HEAT) to recover these funds to promote the solvency of the Medicare Trust Fund and remove incentives for patient care based beyond the considerations of the patient.¹⁰ One of the key elements of the HEAT initiative is the utilization of the FCA, which includes a whistleblower provision allowing “any private citizen,” called a relator, “to enforce the FCA by filing a qui tam action against an entity on behalf of the government.”¹¹ The DOJ has used the FCA to recoup over $14 billion in federal healthcare program funds since January 2009.¹²

The FCA’s whistleblower provision directly impacted the ability of the federal government to uncover the facts underlying the Banks-Jackson case. According to the unsealed complaint in that case filed on October 16, 2008, relator Ralph D. Williams alleged that Banks-Jackson-Commerce Hospital & Nursing Home Authority (now known as Northridge Medical Center)¹³ entered into arrangements with Dr. Narasimhulu Neelargaru, a board-certified cardiologist practicing in Commerce, Georgia, involving improper payments for electrocardiogram (EKG) and other cardiology test “over-reads.”¹⁴ The complaint stated that the over-read interpretations performed by Dr. Neelargaru were reviews of cardiology tests previously performed by another doctor and were done for the purpose of “quality control assessments,” not for diagnosis or treatment purposes.¹⁵ The complaint alleged that this practice of cardiology test over-reading occurred consistently between the hospital and Dr. Neelargaru from 1999 to August 15, 2008.¹⁶ The complaint further alleged that Dr. Neelargaru knowingly “bill[ed] professional fees for the over-reading of EKGs that he harvested from (the) Hospital’s inpatient and outpatient populations,” which the relator claimed violated Dr. Neelargaru’s various contracts with the hospital.¹⁷ The complaint alleges that, on the date of filing, the federal government only reimbursed EKG interpretations upon: (1) proof of “medical necessity”; and, (2) proof of the interpretation “directly (contributing) to the diagnosis and treatment of the individual patient.”¹⁸ Accordingly, the complaint stated that Dr. Neelargaru’s over-readings violated the FCA because of their improper submission to the government for reimbursement, and Dr. Neelargaru’s knowledge of their impropriety. Further, the complaint alleged Dr. Neelargaru also billed the hospital at $167 per hour for his time performing the over-reads, which the complaint described as “double-billing.”¹⁹

The relator instituted internal action to stop the practice in 2008 through his authority as Chief Financial Officer and Compliance Director.²⁰ First, the relator, acting on behalf of the hospital, claimed to withhold payment from Dr. Neelargaru for the months of June, July, and August of 2008, seeking to determine what services Dr. Neelargaru properly performed when he billed the hospital for EKG over-reads.²¹ Second, the relator claimed to have met with the CEO and Dr. Neelargaru regarding the allegedly improper billing for the over-readings, but Dr. Neelargaru provided no concrete information and sought to speak with legal counsel.²² Third, the relator claims he spoke to the hospital’s board of directors regarding the issue, upon which the Board advised the relator to continue “negotiations” with Dr. Neelargaru.²³ Fourth, the relator claimed to submit over 500 pages of documentation related to the issue to outside counsel.²⁴ After performing these actions, the complaint alleges that the hospital terminated the relator with “absence of cause” as defined by his employment contract.²⁵

The hospital settled its claims with the federal government and entered into a corporate integrity agreement with OIG in 2010.²⁶ Nevertheless, the federal government continued to prosecute the case against Dr. Neelargaru individually to seek recoupment of allegedly improperly-paid federal healthcare funds. The federal government and Dr. Neelargaru engaged in litigation surrounding the case for approximately four years beyond the hospital’s settlement agreement, which ultimately ended with the parties signing a sealed settlement agreement that was executed on September 22, 2014.²⁷ In a statement provided to Bloomberg BNA, Dr. Neelargaru denied the allegations against him throughout the entirety of the six-year litigation, characterizing the claims against him as “meritless allegations” and stated that he “always had legal guidance to ensure that all of (his) contracts fully complied with every regulation.”²⁸ Additionally, Dr. Neelargaru claimed that he settled the allegations, in part, because he could no longer “stand up to the unlimited resources of the federal government.”²⁹ Mr. Williams, as the relator in the qui tam suit, will receive a portion of Dr. Neelargaru’s payment to the federal government.³⁰

Healthcare entities should note that the post-filing tactics of the federal prosecution in the Banks-Jackson case serve as another example of OIG’s growing trend of seeking damage payments from individual physicians in healthcare fraud and abuse prosecutions. In April 2014, the federal government and an Ohio cardiologist named Devender Batra entered into a settlement agreement obligating Dr. Batra to pay $1 million to settle allegations of FCA violations.³¹ Similar to the Banks-Jackson suit, the allegations against Dr. Batra and the medical corporation he directs stemmed from a related lawsuit in which the federal government settled FCA allegations with Ohio Valley Health Services, but continued to prosecute the individual physicians involved in the underlying allegation against the health system.³² Additionally, in September 2014, the federal government entered into settlements with a Florida sleep clinic, as well as two affiliated doctors, regarding FCA allegations involving the submission of claims for allegedly unnecessary sleep studies and psychological tests.³³ In one of the settlement agreements, Dr. George Restea agreed to personally pay $100,000 to the federal government to settle the allegations against him.³⁴ The federal government is continuing to prosecute two other physicians for their roles in the underlying facts of each case.³⁵

While none of the settlements place civil or criminal liability on individual physicians, each agreement reflects the federal government’s increasingly utilized strategy of targeting physicians individually for liability under the federal fraud and abuse laws, rather than holding hospitals liable for all financial penalties.  This strategy could affect the course of physician medical practice with hospitals and other large healthcare entities.³⁶ If found liable for an offense under federal fraud and abuse laws, the imposition of financial penalties on individual physicians may serve as an additional penalty beyond potential removal from participation in Medicare, Medicaid, or another federal healthcare program. Moreover, the relationship between a hospital and a physician could change, as physicians and hospitals will enter contractual negotiations with the knowledge that physicians have a greater financial stake in maintaining compliance with fraud and abuse statutes and regulations. Currently, the targeting of physicians, individually, for liability under fraud and abuse laws is relatively rare; however, as enforcement agencies continue to utilize this approach, it will likely play an important role in shaping commitment to regulatory compliance in the healthcare industry, and the willingness of both hospitals and physicians to enter into transactions that are commercially reasonable and do not exceed Fair Market Value (FMV).