Fee Splitting/Kickbacks

The Culpeper decision has lessons for Emergency Medicine. The heart of the suit is forced illegal fee-splitting. AAEM believes similar issues exist with many EM contracts including large contract groups, privately held contracts, and some contractual arrangements with hospitals.

Culpeper, Virginia, Dispute Ends

from http://acr.org, the official website of the American College of Radiology

Eight years after having been barred from practicing, the radiology group at Culpeper Memorial Hospital in Culpeper, Virginia, has returned to work at that hospital in a settlement of a longstanding dispute. Effective early August 1995, Virginia Radiology Associates, P.C., was granted a contract and medical staff privileges to resume delivery of professional radiological services at the Virginia hospital.

The radiologists had lost their staff privileges in Culpeper in 1988 over their refusal to participate in various financial arrangements that they believed risked prosecution under the Medicare Anti- Kickback Law. The dispute led to litigation, as well as an awareness of the issue by the Department of HHS Office of Inspector General. The OIG issued a 1991 management advisory report alerting the industry of potential fraud and abuse concerns raised by certain financial arrangements between hospitals and hospital-based physicians.

Virginia Radiology Associates went through a 10-day trial in the spring of 1995 and won summary judgment in their dispute with the hospital. At trial, the judge ruled, as a matter of law, that the hospital's activities were wrongful and violated Virginia law and public policy. Nevertheless, the jury had awarded zero ($0) damages.

In the opinion, the trial judge, the Honorable Leonard B. Sachs, concluded that the zero ($0) damage award was "arbitrary and capricious, or one motivated by sympathy or bias or concern for the financial concern of the local hospital." The judge concluded that the plaintiff radiologists have offered overwhelming testimony regarding the kickback issue as well as the importance of compliance with the medical staff bylaws at the defendant hospital. Thus, he concluded that the "verdict shocks the conscience of the Court."

In setting aside the jury verdict, the judge ordered, as additur, damages in the amount of $2,996,973 plus interest from the date of verdict to be awarded to the radiologists' professional corporation. The judge's decision led to settlement discussions.

As a result of the settlement, the terms of which are confidential, all litigation has been dismissed and the hospital has dropped its appeal of the judge's ruling.