Justice Department can join Methodist Le Bonheur fraud suit, court rules

The Justice Department can intervene in a lawsuit accusing Methodist Le Bonheur of orchestrating a kickback scheme and submitting hundreds of millions of dollars in false claims, the Commercial Appeal reported March 15. 

The original whistleblower lawsuit, filed in 2017 and unsealed in 2019, alleges that Methodist paid kickbacks that allowed Memphis, Tenn.-based West Clinic's outpatient treatment centers to become part of Methodist Le Bonheur and allowed West Clinic to manage inpatient and outpatient adult care at Methodist Le Bonheur. The plaintiffs claim that one purpose of the payments was to induce referrals from oncologists and other medical specialists at West Clinic to Methodist Le Bonheur.

The lawsuit claims that physicians at West Clinic were given kickbacks for referrals of cancer patients for hospital admissions, chemical infusions, radiation and certain outpatient procedures.

Prosecutors said the alleged scheme took place from 2012-18, with Methodist Le Bonheur paying more than $400 million in kickbacks to West Clinic. Additionally, the lawsuit claims that the scheme resulted in $800 million in fraudulent claims being submitted to Medicare. West Clinic reached a settlement with the original plaintiffs in 2021 and was dismissed from the lawsuit.

The Justice Department filed a motion to intervene in the case last October, saying it found new and substantial evidence to support the case. 

Methodist attorneys disputed that there were substantial new findings since the Justice Department's initial decision to not take on the case and that the U.S. waited too long to intervene.

However, the March 11 ruling from the U.S. District Court of Middle Tennessee allows the Justice Department to jointly prosecute the lawsuit against Methodist. The court said the intervention would only apply to current defendants and the Justice Department can't bring West Clinic back into the lawsuit. 

"The Court does not find good cause to reinsert West at this stage of the case — to do so would not only prejudice West, but would cause undue delay in the proceedings," the court said. 

Tabrina Davis, vice president for marketing and communication for Methodist, told the Commercial Appeal that the health system was disappointed with the court's decision but remains confident "that MLH's affiliation with West Clinic was proper and reflected customary and legal business arrangements."

"The government's belated decision to join the lawsuit two years after it declined to do so has changed nothing about the case: the allegations of the suit are without merit, and we will continue to vigorously defend against them as the legal process unfolds," Ms. Davis told the Commercial Appeal.

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