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DOJ’s $3.8 Million Settlement with Catholic Medical Center Alleges that Provision of Free “Call Coverage Services” Violates Anti-Kickback Statute

On February 9, 2022, the New Hampshire U.S. Attorney’s Office announced that Catholic Medical Center (CMC), a hospital in Manchester, New Hampshire, agreed to pay $3.8 million to resolve allegations that it violated the anti-kickback statute (AKS) and False Claims Act by arranging for a cardiologist to receive “call coverage services at no charge” in exchange for referrals to CMC. According to the government’s press release, when the cardiologist was “on vacation or otherwise unavailable” to cover her call obligations, CMC “paid its own cardiologists” to cover those obligations for her.

The settlement is notable for two reasons:

First, it extends the notion of “remuneration” under the AKS to free call coverage services. The settlement does not allege that CMC paid cash to the cardiologist in exchange for her referrals. 

Second, the press release describing the settlement cites only the AKS, and not the Stark Law, as a predicate for CMC’s False Claims Act liability. The AKS has an exception for “any amount paid by an employer to an employee (who has a bona fide employment relationship with such employer) for employment in the provision of covered items or services.” 42 U.S.C. § 1320a-7b(b)(3)(B). This broad exception often undermines potential AKS cases involving hospital payments to physicians who are hospital employees. By contrast, the Stark Law exception for employee relationships is narrower and sets forth a number of requirements, including that the amount of the remuneration is “consistent with the fair market value of the services,” and “is not determined in a manner that takes into account – directly or indirectly – the volume or value of any referrals by the referring physician.” 42 U.S.C. § 1395nn(e)(2)(B). In this instance, the AKS employee exception did not apply because the cardiologist who received the free call coverage services was not a hospital employee. Rather, the settlement agreement states that the recipient of the kickback was a “sole practitioner cardiologist,” and that CMC “paid some of its employed cardiologists to be near [her] office” and “to be available to provide medical services for [her] patients should the need arise” while she was away.

According to Phil Coyne, the HHS-OIG Special Agent in Charge for New England, this “settlement sends a clear message that these types of financial arrangements will not be tolerated.”