WV Hospital Hit with $50 Million Settlement for Stark Law Violations

On September 9, the U.S. Department of Justice announced that Wheeling Hospital in West Virginia had agreed to pay $50 million to settle allegations of an unlawful physician kickback scheme that took advantage of vulnerable patients. A former executive, fired for raising concerns that the scheme violated the Physician Self-Referral (Stark) Law and the Anti-Kickback Statute, filed a qui tam lawsuit under the False Claims Act and will receive a $10 million reward.

Fired whistleblower confronts former employers

During the dates in question, 2007 to 2020, Wheeling Hospital was under the direction and control of R&V Associates, Ltd., headed by Ronald Violi. At this time, Wheeling had a policy of paying compensation to physicians that were “above fair market value” and/or “based on the volume or value of the physicians’ referrals.” 

When Louis Longo, who was an Executive Vice President at the hospital, voiced opposition to the plan, Mr. Violi fired him. Mr. Longo then filed a qui tam lawsuit under the federal False Claims Act, suing on behalf of the U.S. government. The Department of Justice intervened in the case and its investigation led to the settlement.

Legal basis for prosecution

According to the DOJ statement, Longo’s suit alleged that Wheeling Hospital “systematically violated the Stark Law and Anti-Kickback Statute by knowingly and willfully paying improper compensation to referring physicians….” The Physician Referral or Stark Law prohibits healthcare providers from billing Medicare for certain services when the referring physician has a financial relationship with the provider. The Anti-Kickback Statute prohibits providers from offering or paying compensation to induce referrals covered by Medicare, Medicaid, and other federally funded programs. 

Wheeling planned to drive up revenue by billing for various services. Since many of the patients were enrolled in Medicare or Medicaid, the scheme defrauded these government programs, in violation of the federal False Claims Act. 

The FCA empowers private citizens with specific, unique and nonpublic knowledge of fraud against the government to act as a private Attorney General, filing suit on behalf of the government. The law also allows the whistleblower, also known as the relator, to claim a reward of 15 to 30 percent of the amount the government eventually recovers.

Protecting patient health as well as government coffers

Although the lawsuit’s immediate objective was to recover funds lost by the government, the long-term goal is to provide a strong disincentive for scams that take advantage of vulnerable patients. The Stark Law and the Anti-Kickback Statute were passed to ensure that healthcare providers do not weigh improper financial considerations when making medical decisions, which should be based solely on the patient’s best interests. 

Jeffrey Bossert Clark, Acting Assistant Attorney General of the Department of Justice’s Civil Division, commented that, "Improper financial arrangements between hospitals and physicians can influence the type and amount of healthcare that is provided. The department is committed to taking action to eliminate improper inducements that can corrupt the integrity of physician decision-making."

Scott W. Brady, U.S. Attorney for the Western District of Pennsylvania, echoed that sentiment. “Medicare and Medicaid beneficiaries trust that their healthcare providers will make decisions based on sound medical judgment. Our office will take decisive action against any medical providers, which betray that trust and make medical decisions based on their own financial interests. Our seniors deserve nothing less."

Qui tam lawsuit prompts restructuring of hospital leadership

The False Claim Act is one of the government’s most potent weapons in the war against healthcare fraud. Beyond the funds recovered, another benefit of the lawsuit was that Wheeling Hospital was compelled to reform its management. They dismissed Violi and R&V Associates, and signed a new management agreement with WVU Health System. 

Bill Powell, United States Attorney for the Northern District of West Virginia, said, "We are pleased this settlement will enable Wheeling Hospital to resolve these prior False Claims Act violations and continue to provide a full range of healthcare services to patients in the area."

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