Mercy to Pay $34 Million in Settlement with DOJ Over Physician Compensation

May 19, 2017

Mercy Hospital Springfield and Mercy Clinic Springfield Communities have agreed to pay $34 million to resolve a lawsuit related to physician compensation.

According to a statement issued Thursday by the U.S. Justice Department, the healthcare organization allegedly violated the False Claims Act through improper payments to oncologists.

Front entrance of Mercy Springfield at National and Cherokee
Credit Scott Harvey / KSMU

The agency says the settlement resolves allegations “that the defendants submitted false claims to the Medicare Program for chemotherapy services rendered to patients referred by oncologists whose compensation was based in part on a formula that improperly took into account the value of their referrals of patients to the infusion center operated by the Defendants.”

Under federal law, financial relationships hospitals and clinics may have with doctors who refer patients to them are restricted.

Acting Assistant Attorney General Chad A. Readler of the DOJ’s Civil Division said, “When physicians are rewarded financially for referring patients to hospitals or other health care providers, it can affect their medical judgment, resulting in overutilization of services that drives up health care costs for everyone.”

The release goes on to say the allegations arose from a lawsuit filed by a whistleblower, Dr. Viran Roger Holden, a physician previously employed by Mercy Springfield. Under the qui tam provisions of the False Claims Act, private citizens can bring suit on behalf of the government for false claims and share in any recovery. Holden will receive $5.4 million of the settlement award. The Springfield News-Leader reports that Holden had sued Mercy for wrongful termination in 2015. Online court records show that suit appears to have been settled.

In its own statement, Mercy said the lawsuit resolved Thursday involves how physicians were paid for their work in the Mercy Hospital Infusion Center between 2009 and 2014.

“The physicians who worked in the infusion center did nothing wrong, and all patients received services that were medically necessary and were billed appropriately for the care they received. The same high standards of care were in place both before and after the infusion center changed from being clinic-based to hospital-based,” the Mercy statement read.

Mercy says its infusion center was formerly part of Mercy Clinic. In 2009, the center was transferred to Mercy Hospital Springfield to enable participation in a federal drug pricing program that would provide cost reductions for chemotherapy treatment. But Mercy Clinic continued to operate the center under a management agreement with the hospital, and the hospital paid the clinic for management services. Oncologists received payment from the clinic for their services at the center.

According to the hospital, “The mistake occurred when the clinic paid the physicians in a manner determined by the DOJ to be a technical violation of federal law.” It continues, “These were regulatory issues, not patient care issues.”

As part of the settlement, the DOJ acknowledged that Mercy did not intentionally violate the law and there has been no determination of liability.

Jon Swope, regional president of Mercy Central Communities, reiterated in a video statement that “this issue was about administrative mistakes and how we paid our doctors,” noting that patient care was unaffected.

The hospital says it’s been able to plan for the settlement expense in the past year by setting aside necessary funds, which “will not have an impact on current fiscal year finances and operations.”

Swope added that because of this, costs will “absolutely not be passed on to patients or result in staffing cuts.”

As part of the settlement, Mercy Hospital Springfield and Mercy Clinic Springfield Communities signed a five-year Corporate Integrity Agreement with the Office of Inspector General. It requires Mercy to “conduct enhanced training and education, perform regular internal reviews and policy and procedure updates, and implement more rigorous governance oversight structure related to physician contracting and compensation practices.”