February 21, 2022 

Alleged “Free” Call Services – Recent Settlement
This settlement clarifies the government's position on hospitals providing call services at no charge to cover patients for independent physicians on its medical staff.
By Ann Ford and Nicolette Taber

Recently, Catholic Medical Center (CMC), a hospital in New Hampshire, settled allegations that it provided "free" call coverage services to an independent contractor cardiologist on its staff in violation of the False Claims Act ("FCA") and the Anti-Kickback Statute ("AKS"). CMC agreed to pay $3.8 million to resolve them. The whistleblower, a former CMC cardiologist, will receive $570,000 of the proceeds.

Dr. Joseph Goldberg, the former chairman of the CMC department of medicine and vice president of the medical staff, filed a qui tam action in the United States District Court for the District of New Hampshire in 2018, pursuant to the qui tam provisions of the FCA.
  • Dr. Goldberg alleges, among other things, that CMC submitted false claims for payment to the United States Government by providing remuneration to a cardiologist to induce her to refer patients to CMC in violation of the AKS.
  • The Complaint focuses on conduct between January 1, 2009, through December 31, 2019.
  • During that time, CMC allegedly paid its employed cardiologists to be near the office of the cardiologist in question during days she was on vacation or otherwise unavailable, and to be available to provide medical services for patients should the need arise.
  • The claim also alleges the cardiologist in question referred "millions of dollars in procedures and services to CMC" over the decade in which CMC provided the call coverage services.
This settlement clarifies the Government's position on hospitals providing call services at no charge to cover patients for independent physicians on its medical staff.

On-call cardiologist services provided by a hospital's employed clinical staff, for inpatients that were the responsibility of the independent physician, is a transfer of value to the physician from the hospital. Independent physicians make referrals to hospitals in the form of inpatient hospitalizations or hospital-based procedures. In this case, the referrals were reportedly valued at "millions of dollars over decades of services."

The U.S. Department of Justice has consistently prosecuted hospitals and healthcare providers for kickback schemes involving "free" services. In 2014, several hospital executives and physicians from Sacred Heart Hospital in Chicago, Illinois, were charged with participating in an allegedly illegal kickback scheme. In that case, the hospital was charged with paying kickbacks to physicians in the form of payments under the following types of agreements:
  • Direct personal services contracts,
  • Teaching contracts,
  • Lease agreements for the use of office space, and
  • Agreements to provide physicians with the services of other medical professionals.
With regards to the latter type of arrangement, the hospital officials were convicted of violating the AKS by offering physicians free labor from physician assistants and nurse practitioners in exchange for patient referrals.

The 7th Circuit Court of Appeals affirmed the defendants' convictions and found that Sacred Heart's chief executive officer and chief operating officer knowingly violated the AKS by providing false information to their outside counsel, stating individual physicians would compensate the physician assistants and nurse practitioners provided to them by the hospital, when in fact, the hospital paid those professionals.

Assessing all existing formal or informal financial agreements, in cash or in kind, that a hospital has with physicians is part of any effective hospital compliance program. In the CMC matter, however, periodic routine audits of financial arrangements with physicians may not have detected the allegedly improper financial arrangement if contracts and financial data were the only sources of information audited.

It can be challenging for compliance and audit professionals to discover/uncover these unwritten arrangements. Even if this type of financial arrangement is made with the primary intent to provide assistance to another specialist, and not to induce referrals, it is worth following up on any internal or external reports received to bring them into compliance with a written agreement documenting fair market value payments for services rendered. It may also be useful to include interviews of key staff when auditing hospital-physician financial arrangements.

Do you have questions about the Anti-Kickback Statute? Please contact Ann Ford and Nicolette Taber.