A Medical Device Daily

Covenant Medical Center (Waterloo, Iowa) has agreed to pay the U.S. $4.5 million to resolve allegations that it violated the False Claims Act, the Department of Justice (DoJ) reported.

This settlement resolves allegations that Covenant submitted false claims to Medicare by having financial relationships with five physicians that violated the Stark Law. The Stark Law prohibits a hospital from profiting from referrals of patients made by a physician with whom the hospital has an improper compensation arrangement. An arrangement is improper if a physician is paid above fair market value for their services and that compensation is not commercially reasonable. The Stark Law is intended to ensure that physicians' medical judgments are not compromised by improper financial incentives and are based solely on the best interests of the patient.

The U.S. alleged that Covenant violated the Stark Law by paying commercially unreasonable compensation, far above fair market value, to five employed physicians who referred their patients to Covenant for treatment. These physicians were among the highest paid hospital-employed physicians not just in Iowa, but in the entire country.

Tony West, Assistant Attorney General for the DoJ's Civil Division, said, "Healthcare providers must act in the best interests of their patients. The Justice Department will protect patients by pursuing hospitals that have improper financial relationships with physicians."

"This payment is the largest ever related to claims of healthcare fraud in the Northern District of Iowa," said U.S. Attorney Matt Dummermuth of the Northern District of Iowa. "We are actively working with our investigative partners to ensure Medicare funds are properly spent, and we will continue to aggressively pursue all types of fraud in order to protect federal health care dollars."

The Justice Department's Civil Division and the United States Attorney's Office for the Northern District of Iowa jointly handled this case. The Office of the Inspector General, Department of Health and Human Services provided investigative assistance.