This is a Stark settlement that will send chills down the spines of hospital compliance officers. Rush Medical Center has entered into a Settlement Agreement with the DOJ, in which they agree to pay approximately $1.5 in False Claims Act Penalties.

The settlement arose out of a qui tam (whistleblower) lawsuit filed in July 2004. The Department of Justice intervened on behalf of the whistleblowers. Among the alleged Stark Law violations were the lack of fully executed written leases and lease arrangements with inconsistent rental terms among physicians.

Since the financial relationships between Rush Medical Center and the physicians did not qualify for Stark exceptions, the referrals by the physicians to the hospital were prohibited, and billing for the illegally referred services by the hospital was prohibited – thereby generating the False Claims Act violations. The whistleblowers collected approximately $270,000 of the settlement money. 

Note that the false claims were submitted by the hospitals and therefore the penalties were paid by the hospital, which is one of the reasons hospitals believe that the penalties for Stark violations fall unfairly upon the hospitals, even when the physicians are equally involved.