Akron General Health Systems, a regional hospital system based in Akron, Ohio agreed to pay $21.25 million to resolve allegations under the False Claims Act that it maintained improper relationships with referring physicians, resulting in the submission of false claims to the Medicare program. 

Akron General was acquired in late 2015 by the Cleveland Clinic Foundation.  The timing of the case and the investigation raise a question as to whether the Cleveland Clinic discovered the problematic physician payment arrangements during pre-acquisition due diligence or after as part of the post-closing integration process.  It appears that Cleveland Clinic discovered the violations after the acquisition, voluntarily disclosed the matter and then fully cooperated.

The settlement resolves claims that Akron General violated the Anti-Kickback laws and the Physician Self-Referral Law, the Stark Law, by compensating physicians substantially in excess of fair market value to secure referrals of patients to the hospital system. The claims for the illegally referred patients violated the False Claims Act.

The Anti-Kickback laws prohibit offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid or other federal health programs.  The Stark Law prohibits a hospital from billing Medicare for certain services referred by physicians with whom the hospital has an improper financial arrangement, including the payment of compensation that exceeds the fair market values of the services actually provided by the physician.

After acquiring Akron General, the Cleveland Clinic discovered the problematic physician compensation and referral arrangements.  The Cleveland Clinic issued a statement, “We promptly reported the matter to the Department of Justice and fully cooperated with its review.”

The Justice Department credited the Cleveland Clinic’s voluntary disclosure of the matter. The Cleveland Clinic also received credit for its full cooperation during the investigation. 

The whistleblower, Beverly Brouse, the former director of Internal Audit at Akron General, initiated the False Claims Act case.

Brouse raised the compliance issues with Akron General’s Internal Compliance and Audit Committee in 2015 and was subsequently terminated by the hospital system.  Brouse’s qui tam complaint alleged that her firing “was in retaliation for her efforts to report and remedy the violations of the Federal False Claims Act.”  Brouse recovered a portion of the $21.3 million settlement. 

Brouse’s counsel issued a statement in response to the settlement announcement, “I raised in good faith issues regarding arrangements that [Akron General] had with certain physician groups. “Those arrangements are discussed in the settlement agreement reached with the [DOJ]. I also had concerns about my termination from [Akron General]. I am pleased that DOJ, Akron General and I were able to resolve these matters.”