MedStar Health to Pay $35 Million Over Kickback Allegations, Three Whistleblowers to Receive 7-Figure Awards

Maryland-based MedStar Health and two of its affiliates have agreed to pay $35 million to the government to resolve allegations that they engaged in conduct that violated the Anti-Kickback Act.

MedStar Health to Pay $35 Million Over Kickback Allegations, Three Whistleblowers to Receive 7-Figure Awards

The settlement resolves a lawsuit brought by three whistleblowers under the False Claims Act. MedStar’s two co-defendants are MedStar Union Memorial Hospital, and MedStar Franklin Square Medical Center, both based in Baltimore.

According to the complaint, MedStar Health paid kickbacks to Maryland-based MACVA, a cardiology group, in exchange for referrals of Medicare-covered patients in need of lucrative cardiac surgery. The kickbacks were allegedly disguised as contracts for services to be provided at the Union Memorial and Franklin Square hospitals. Eventually, the alleged scheme led MedStar to submit false claims for payment to Medicare.

For the U.S. Attorney for the District of Maryland, Robert K. Hur, the government cannot "tolerate medical care providers who put their patients at risk and waste taxpayers' dollars in order to line their own pockets."  

The alleged misconduct, which reportedly took place between 2006 and 2011, appears as another shocking display of the rampant healthcare fraud that is costing U.S. taxpayers billions of dollars every year.

The whistleblowers that brought the case were three Baltimore-based cardiac surgeons: Stephen D. Lincoln, MD; Peter Horneffer, MD; and Garth McDonald, MD. All three are members of Cardiac Surgery Associates, a known competitor of MACVA, which suffered losses due to the alleged kickbacks steering business towards MACVA.

In 2011, Dr. Horneffer filed a separate lawsuit over whistleblower retaliation on the part of his employer, St. Joseph Medical Center, concerning his participation in the suit against MedStar and its affiliates. At the time, Horneffer told reporters, “[MACVA] used its referral leverage to force St. Joseph’s to provide [financial] kickbacks to the cardiology group.”

As a result of the recent settlement, Horneffer and his fellow plaintiffs will share a whistleblower award amounting to several million dollars. Under the False Claims Act, relators are entitled to a 15-30 percentage of any recoveries resulting from their suit. In cases, like this one, where the government intervenes, the maximum reward is 25 percent.

Besides the kickback allegations, the settlement has also resolved a previous lawsuit filed by three patients of a MedStar doctor, John Wang, MD, who was previously employed by MACVA. According to the patients’ complaint, Dr. Wang performed unnecessary angioplasty with stent placement on them, and MedStar billed Medicare for these procedures.

While MedStar told reporters that it only settled to “avoid protracted and distracting litigation," the Office of the Inspector General’s Special Agent Maureen R. Dixon said in a statement, “Patients rightly expect their doctors will make recommendations based on sound medical practice – not payoffs . . . We will continue to protect patients and taxpayer-funded government health programs from these unnecessary services, as the government contended in this case.”

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