Physician’s Alliance: Referrals to HMA Hospitals

In the Physicians Alliance PAL HMA settlement, the practice and three executives agreed to pay $4 million to resolve allegations of kickbacks for hospital referrals. They also agreed to pay a percentage of proceeds from selling PAL’s interest in a joint venture with Health Management Associates. The alleged bargain put a financial benefit to the practice behind the choice of hospital, a decision patients rely on their physicians to make for their care.

The Justice Department’s December 19, 2017 announcement identified Physician’s Alliance Ltd., known as PAL, as a physician group headquartered in Lancaster, Pennsylvania. It alleged that HMA paid PAL to refer patients to Lancaster Regional Medical Center and Heart of Lancaster Medical Center from 2009 through 2012. Both hospitals belonged to HMA.

PAL’s settlement concerned alleged physician kickbacks for hospital referrals. The same announcement described a separate settlement with EmCare over allegations that it accepted payments to recommend inpatient admissions when patients should have received outpatient care.

What HMA Allegedly Bought From PAL

The government alleged that PAL accepted value from HMA in exchange for sending patients to its hospitals. We see the absurdity in that bargain: the patient needs a medical recommendation, while the hospital allegedly buys a sales channel. The patient’s destination becomes part of the deal.

A kickback does not have to be cash. The Journal of AHIMA’s 2017 article Busting Bad Medicine: a Call to Action Addressing Healthcare, Fraud, Waste, and Abuse gives examples including free rent, expensive hotel stays and meals, and excessive compensation for consultations. A benefit can save the referring practice an expense as well as put money into its account.

The Saint Joseph and Cumberland Clinic case shows why the label on a payment matters. In the Kentucky physician settlement announced in October 2014, the government alleged that sham management compensation bought exclusive cardiology referrals. That is a concrete example of the question behind a referral arrangement: what work did the agreement describe, and what business did the payment buy?

The Hospital Destination Has Its Own Financial Pull

A financial relationship can influence both how much care a physician recommends and where a patient receives it. The Robert Wood Johnson Foundation’s 2008 research synthesis, Physician Self-Referral and Physician-Owned Specialty Facilities, distinguishes those incentives. It describes a financial reason to recommend additional services, including unnecessary ones, and a separate reason to direct patients to a facility with which the physician has a financial relationship. In the PAL allegations, the destination is central: the alleged benefit came from the company whose hospitals received the referrals.

The report explains the attraction of facility ownership: physicians can receive payment for their own services and a share of the facility’s profit. It identifies a further incentive that a busy practice would recognize:

The synthesis also points to a gap between the patient’s knowledge and the physician’s: patients generally cannot judge whether a particular service is necessary. It explains that payment for each service rewards more care, while payment per hospital admission gives the facility its own reason to seek volume. That is why the referral decision matters to both businesses.

For someone who knows a hospital-practice arrangement, the useful question is what income follows the patient beyond the physician’s bill. PAL’s settlement reached its interest in a joint venture with HMA through the sale-proceeds term, giving that ownership relationship a place in the resolution as well.

What an Insider Can Connect

Two former HMA hospital executives brought the qui tam case alleging the arrangement between PAL and HMA. Their hospital-side knowledge became the basis of a case against the referring practice and its executives. The Department of Health and Human Services Office of Inspector General and the FBI conducted the investigations, and the Justice Department handled the PAL resolution.

The useful evidence connects the business arrangement to the referrals and government claims. Someone working with practice finances may know what benefit the practice received and what the agreement said it was for. Someone on the hospital side may know what referrals were expected and how those expectations appeared in the business relationship.

We work with the person who can explain how those pieces fit: the value offered, the decisions behind it, the patients sent to the hospital and the resulting claims. The payment’s description and the business it bought are the connection we want to understand, whether the person explaining it worked for the referring practice or the receiving hospital.

How Much of a Settlement Does a Whistleblower Get?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. That whistleblower reward is a share of the recovery, distinct from the amount a defendant agrees to pay.

You Know the Arrangement Behind the Referral

If you know what a practice received for sending patients to a hospital, speak to one of our Whistleblower Experts about the arrangement. We build your case with you around the financial terms, referral decisions and government claims, and bring in healthcare fraud whistleblower lawyers who know hospital referral cases. We stay beside you as your knowledge of the business becomes the foundation of the case.