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Medical Center Settlement Included Allegation of Kickbacks for Cardiology Practice Call Coverage

On February 9, 2022, the Department of Justice announced that Catholic Medical Center (CMC) will pay $3.8 million to settle allegations of kickbacks and False Claims Act violations. The qui tam lawsuit began when a complaint was filed on June 14, 2018 by Dr. David Goldberg, a cardiologist formerly employed by CMC. Dr. Goldberg (“the relator”) alleged that, among other concerns, CMC Heart Institute leadership oversaw a decade-long “moonlighting” arrangement that paid its physicians to provide weekend and holiday call coverage to the private practice of a high-volume-referral cardiologist, at no cost to her practice.

According to CMC public relations director Lauren Collins-Cline, the call coverage arrangement was put in place nearly 15 years ago under the advisement of legal counsel. She claims it is no longer in effect and stated that the other listed allegations have been dismissed. The Department of Justice press release announcing the settlement indicates that the $3.8 million is solely to resolve allegations related to the call coverage arrangement.

The complaint filed by Dr. Goldberg stated that CMC paid above market rates of $10,000 per weekend and $3,000 per night to CMC physicians for the private practice call coverage services. For reference, this amount is above the 90th percentile on-call daily rate (per 24-hour cardiology shift) in the 2021 BFMV Physician Call Coverage Burden and Compensation Survey.

Whether or not the rates paid by CMC to the on-call physicians were fair market value (FMV), it is important to note that providing free call coverage services to a private practice physician is problematic. Physician services arrangements must be commercially reasonable, structured in a way that ensures physician services are bought and sold only when a legitimate business purpose, not related to referrals or other business generated for either party, exists for the transaction. [1]

In this situation, the government and Dr. Goldberg felt that it made no commercial sense for CMC to pay any amount to its own physicians to cover for an outside private practice with zero remuneration. The complaint asserts that the only logical rationale would be the quid pro quo of the referral pipeline.

The CMC settlement serves to spotlight the prohibition of hospitals from providing services and/or resources of significance for below fair market value to private practice physicians. In this case, the alleged violation involved free call coverage services while, historically, other complaints have been filed against hospitals for providing free or below FMV equipment and space rentals, marketing services, and staffing support services, among others.

BFMV has provided consultations and FMV opinions for call coverage transactions for health systems and medical groups nationwide. For assistance with new call coverage structures or the review of an existing arrangement, contact us.

[1] 42 CFR § 411.354(d)(5) and (6)

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