Justice Department backs $800M fraud claim against Tennessee health system

The Justice Department on April 11 filed a complaint in intervention alleging Memphis-based Methodist Le Bonheur Healthcare violated the False Claims Act and the Anti-Kickback Statute. 

The Justice Department intervened in the whistleblower lawsuit, which was filed in 2017 by the former president of Methodist University Hospital in Memphis. In 2019, the former executive dean and vice chancellor at the University of Tennessee Health Sciences Center, who served on Methodist University Hospital's board from 2011 to 2017, joined the lawsuit. 

The whistleblower complaint alleges physicians at West Clinic referred patients to Methodist Le Bonheur in exchange for kickbacks. The scheme caused damages to Medicare and Medicaid in excess of $800 million, according to the amended complaint filed last year. 

The Justice Department, which began investigating the alleged wrongdoing after the whistleblower lawsuit was filed, alleges the agreement between Methodist Le Bonheur and West Clinic purported to be a lawful way for West's patients to be treated at the system's facilities by West-employed physicians for outpatient and inpatient services. The government alleges there was never any formal partnership created as to do so would likely have violated regulatory requirements. 

"Methodist knowingly agreed to pay West millions of dollars in kickbacks for the revenues Methodist expected to, and ultimately did, realize from West's referrals," the Justice Department alleges. "The arrangement lasted from January 1, 2012, through December 31, 2018, and continued even after Methodist knew that the United States was investigating these allegations following the filing of the whistleblowers' lawsuit."

Methodist Le Bonheur said it intends to refute the government's allegations. 

"The government's complaint recycles a familiar set of allegations that mischaracterize the relationship between MLH and West Clinic," Methodist Le Bonheur Healthcare said in a statement shared with Becker's Hospital Review. "As we have said many times since this lawsuit was made public more than two years ago: The affiliation's compensation structure was designed by respected outside experts who determined it reflected fair market value for such services. Our payments were appropriate, and MLH received the services due under affiliation agreements. The government’s belated decision to intervene in the suit two years after it declined to do so has changed nothing about the case."

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