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Steward Health Care System Admits Engaging in Conduct that Violated Stark and Anti-Kickback Laws, according to Belated Public Announcements

Almost four months ago, I posted about a curious settlement involving a Massachusetts urology practice, Brockton Urology Clinic LLC (Brockton Urology), that agreed to pay $100,000 to resolve False Claims Act allegations that it took money from a Steward Health System (Steward) hospital to run a “Prostate Center of Excellence” that never existed. At the time, I queried whether Steward would face justice for its role in this scheme.

Last Thursday, June 9, 2022, the other shoe finally dropped, as word came out that Steward had agreed to pay over $4.7 million to resolve allegations concerning the Brockton Urology deal and other matters. According to the settlement agreement, however, Steward, DOJ, the Commonwealth of Massachusetts, and the relators had finalized their agreement by April 25, 2022. Why did it take another six weeks for the parties to announce the agreement? Neither the DOJ press release nor the agreement itself answers that question.

In yet another curious development, relators’ counsel announced the settlement a day before DOJ did. Their announcement prompted a Patriot Ledger article that quoted a Steward statement in which the company “vehemently denies it violated any referral laws and has admitted no wrongdoing in this matter whatsoever.”

The next day, when DOJ finally issued its press release, it took pains to say that, “Despite its public denials, in the signed settlement agreement, Steward ‘admits, acknowledges, and accepts responsibility’ for the facts underlying the government’s allegations.”

Indeed, Steward’s admissions were extensive. Regarding the Brockton Urology arrangement, Steward admitted that, over a period of more than six years, from 2011 to 2017, one of its hospitals, Good Samaritan Medical Center (GSMC), paid Brockton Urology to administer the non-existent ““Prostate Cancer Center of Excellence.” During the same period, Steward admitted, “Brockton Urology referred patients to GSMC.”

Similarly, Steward admitted that, during the period 2011 to 2015, it paid another urology entity, Adult & Pediatric Urology Center P.C. (A&P), at least partly “to provide a physician to serve as the director of GSMC’s Prostate Cancer Program.” According to Steward’s admissions, A&P never provided such a physician to Steward, but it did refer patients to Steward.

The government alleged that this conduct violated the Stark Law and the anti-kickback statute, and it certainly appears that it did. While the settlement agreement also notes that Brockton Urology and A&P provided on-call services to GSMC, neither entity provided the services for which GSMC had agreed to pay them, and they did refer patients to GSMC. Payments in exchange for referrals are plainly illegal, and Steward’s admissions in the settlement agreement provide no reason to think otherwise.

The settlement agreement further describes two other illegal arrangements that Steward self-disclosed after the government started investigating the illegal urology deals. First, Steward admitted that it leased real property to numerous physicians and physician practices that were referral sources, but did not collect portions of the rent owed, “resulting in some of those entities paying below fair market value” for the use of the real property. Steward also admitted that it paid Dr. Bahige Asaker, another referral source, “to serve as GSMC’s Medical Director of Post-Acute Care Services,” but that “Dr. Asaker did not submit timesheets or other documentation to demonstrate that he performed the services required under his compensation arrangement and Steward has been unable to confirm that Dr. Asaker performed the services.”

In short, notwithstanding Steward’s “vehement[] deni[al],” Steward has admitted that its Massachusetts hospital business engaged in a wide range of illegal pay-for-referrals schemes.

One final curious aspect of the settlement is that it reserves the claims of one of the relators, urologist Stephen Zappala, in a state court lawsuit where he alleges that Steward pressured him to send his referrals to Steward facilities and even went so far as to cancel appointments Dr. Zappala’s office had made for patients at non-Steward facilities. Typically, False Claims Act settlements resolve all claims between the relators and the defendants, especially where the claims involve similar facts. Here, it appears that Dr. Zappala will collect his relator’s share and still have the chance to continue litigating his claims that Steward engaged in illegal referral practices.