Kalispell Regional Healthcare expects to settle a lawsuit and federal investigation into allegations that it broke federal law in paying kickbacks and illegal bonuses to doctors who referred patients to the hospital, according to a hospital spokeswoman.
While no formal documentation has been written or signed, KRH has come to a “settlement in principal” to resolve the case and expects it to be final soon, director of communications and marketing Mellody Sharpton wrote in a statement to the Missoulian.
In addition to a whistleblower lawsuit filed in May 2017 and recently unsealed, Sharpton said the settlement will resolve a parallel investigation by the U.S. Department of Health and Human Services and the U.S. Department of Justice into the compensation to some KRH physicians.
No other details were offered regarding the settlement, although last month Kalispell Regional Healthcare announced it had set aside $21.5 million for the possibility of settling the case.
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In a lawsuit filed under the Federal False Claims Act in spring 2017, Jon Mohatt — the chief financial officer of the physician network at the hospital — accused Kalispell Regional Healthcare of defrauding the federal government. According to Mohatt, the hospital used a scheme of kickback payments to reward doctors for referring patients back for other services at the hospital, then billing federal health programs like Medicare and Medicaid for the expenses.
The allegations would run afoul of federal statute commonly called the Stark Law that forbids paying doctors for the volume and value of referrals they generate, rather enforcing that they be compensated at fair market value for the services they provide.
According to the suit, Mohatt said that between 2014 and 2016, 34 physicians at Kalispell Regional Healthcare were paid $38.8 million in cash despite only bringing in $24.5 million in collections.
Specialists at the heart and lung center were paid enough to generate a $5.1 million loss for the program in 2015, Mohatt said, although he claims that high levels of pay came in exchange for the $6.9 million in revenue the hospital generated from referrals from those specialists the same year.
“KRH continues to dispute the allegations of misconduct in the recently unsealed legal complaint but strongly believes that a settlement allows our physicians and employees to move forward and focus on providing excellent care which benefits our community,” Sharpton said in the statement Friday. “It's important to recognize that the investigation is focused solely on physician compensation, not the quality of care we provide.”