On January 16, the United States filed a complaint under the False Claims Act against a Louisiana-based hospital management company, three long-term care hospitals it managed, and a doctor, alleging violations based on medically unnecessary care and patient referrals in violation of the Anti-Kickback Statute and Stark Law.
Long-term care hospitals (LTCHs) provide inpatient hospital services for patients whose medically complex conditions require extended hospital stays and specialized programs of care. Medicare reimburses LTCHs based, in part, on a patient’s length of stay. According to the complaint, the company and the LTCH defendants allegedly kept patients hospitalized longer than medically necessary to increase Medicare reimbursement. The United States alleges that certain patients were not discharged when their course of treatment had been completed or when they could have been transferred to a lower level of care, because earlier discharge would have resulted in lower Medicare payments.
The complaint further alleges that one LTCH entered into medical directorship agreements with a doctor and provided other remuneration to induce him to refer patients to the hospital, in violation of the Anti-Kickback Statute and the Stark Law.
“Schemes that involve false claims and unlawful referrals erode the integrity of federal healthcare programs and betray the trust placed in providers,” said Acting Deputy Inspector General for Investigations Scott J. Lampert at the US Department of Health and Human Services, Office of Inspector General (HHS-OIG). “The False Claims Act is a critical tool for protecting Medicare and ensuring that patient care decisions are driven by medical necessity—not financial gain. HHS-OIG will continue to work with our partners to hold accountable those who put profits over patients.”
Compliance Perspective
Issue
The Anti-Kickback Statute prohibits the offering, payment, solicitation, or receipt of remuneration to induce or reward referrals for items or services reimbursed by Medicare, Medicaid, or other federally funded healthcare programs. The Physician Self-Referral Law (Stark Law) prohibits providers from billing Medicare for designated health services referred by physicians with whom they have certain financial relationships, unless a statutory or regulatory exception applies. Violations of the Anti-Kickback Statute or the Stark Law may result in liability under the False Claims Act, including significant civil penalties and damages. These laws are intended to safeguard patient care and protect federal healthcare programs from financial arrangements that may improperly influence clinical decision-making. Healthcare providers must be able to identify improper financial relationships, ensure services are medically necessary, and report potential compliance concerns in a timely manner.
Discussion Points
- Review policies and procedures to ensure they effectively address the prevention, detection, and reporting of false claims, kickbacks, and improper financial relationships. Include guidance on acceptable compensation arrangements and referral practices. Confirm that policies clearly outline how to assess whether services or referrals meet applicable regulatory requirements. Consider periodic policy reviews with an external compliance or regulatory consultant to help identify gaps and emerging risks.
- Provide regular education and training to appropriate staff on the Anti-Kickback Statute, the Stark Law, and the False Claims Act. Training should focus on recognizing prohibited conduct, understanding reporting obligations, and reinforcing the importance of accurate documentation and medical necessity in patient care decisions. Med-Net Academy offers the course Medical Director Contracts in a Nursing Facility, which identifies the Anti-Kickback Statute and the Stark Law and explains the required components of physician contracts.
- Conduct routine audits of billing practices, documentation, and financial relationships with referral sources to identify potential compliance risks. Audits may include targeted reviews of length-of-stay decisions, physician arrangements, and referral patterns. Facilities may also consider engaging an independent reviewer to perform focused or mock audits to proactively identify deficiencies and support corrective action before issues escalate.
*This news alert has been prepared by Med-Net Concepts, Inc. for informational purposes only and is not intended to provide legal advice.*