False Claims Act

A physician-owned chain of family medicine clinics located in and around Columbia, South Carolina, Family Medicine Centers of South Carolina, LLC (“FMC”), has agreed to pay the United States $1.56 million, and its principal owner and former chief executive officer, Dr. Stephen F. Serbin, and its former Laboratory Director, Victoria Serbin, have agreed to pay $443,000, to resolve a False Claims Act lawsuit alleging that they submitted and caused the submission of false claims to the Medicare and TRICARE programs. The allegations arose from a qui tam complaint filed by a former physician employee under the whistleblower provisions of the False Claims Act. For her share in the recovery, the physician will receive $340,510.

The settlements resolve allegations that FMC, as directed by Dr. Serbin, submitted claims to the Medicare Program that violated the physician self-referral prohibition, commonly known as the Stark Law, which forbids a clinic from billing Medicare for certain services ordered by physicians who have a financial relationship with the entity. FMC’s incentive compensation plan that paid FMC’s physicians a percentage of the value of laboratory and other diagnostic tests that they ordered through FMC. In this case, the government alleged that FMC’s incentive compensation plan violated the Stark law because the compensation considered the volume or value of any referrals. Indeed, Dr. Serbin, FMC’s co-owner and chief executive, allegedly initiated this program and reminded FMC’s physicians that they needed to order tests and other services through FMC in order to increase FMC’s profits and to ensure that their take-home pay remained in the upper level nationwide for family practice doctors.

The settlements also resolve allegations that FMC, Dr. Serbin and Victoria Serbin submitted and caused the submission of false claims to Medicare and TRICARE for medically unnecessary laboratory services. The allegedly unnecessary serviced included custom laboratory panels comprised of diagnostic tests not appropriate for routine measurement, performing these tests without an order from the treating physician, implementing standing orders to assure these custom panels were performed with defined frequency and not in reaction to clinical need, and programming FMC’s billing software to systematically change certain billing codes for laboratory tests to ensure payment by Medicare.

In line with the Federal Government’s increased focus on holding individuals accountable for fraud and abuse, FMC and the Serbins also agreed to enter into a Corporate Integrity Agreement (“CIA”) with the Department of Health and Human Services, Office of Inspector General (HHS-OIG).  The CIA obligates FMC to undertake other substantial internal compliance reforms, including hiring an independent review organization to conduct annual claims reviews.  The claims will be reviewed to determine whether the items and services furnished were medically necessary and appropriately documented, and whether each claim was correctly coded, submitted, and reimbursed.

Remarkably, the CIA also holds the Serbins individually accountable for stipulated penalties of up to $2,500 per day and subjects them to suspension or exclusion from participation in the Federal health care programs for failure to comply with certain obligations of the CIA.  Through this CIA, the Department of Justice has demonstrated that it will continue to hold individuals accountable for alleged corporate wrongdoing.

This CIA highlights critical issues health care organizations and their employees face today: the government is focused on holding individuals accountable for Stark Law and False Claims Act violations.  If you have questions about these issues or would like guidance on this topic and how it relates to your health care organization, please contact us.

Greg Lindquist is a health law attorney at Caplan and Earnest. He was supported in this article by Meghan E. Pound, the health law practice group leader for Caplan and Earnest, and Julie Schneider, a law clerk. To contact Greg, please call 303-443-8010 or email him at [email protected].