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St. Joseph’s settles False Claims suit by U.S. for $22M

St. Joseph Medical Center has agreed to pay $22 million to settle allegations that it paid illegal kickbacks to MidAtlantic Cardiovascular Associates over a 10-year period and, separately, billed federal benefit programs for “medically unnecessary stents.”

MidAtlantic demanded and received extra compensation from St. Joseph for referring its “lucrative cardiac procedures” to the hospital from 1996 to 2006, according to the settlement agreement released Tuesday by the U.S. Attorney’s Office in Baltimore.

“Kickbacks give doctors an incentive to pursue unnecessary treatments that are costly and sometimes even dangerous to patients,” U.S. Attorney Rod J. Rosenstein said in a statement. “Medical care providers are prohibited from giving or receiving kickbacks because of the risk that they will put their own financial interests ahead of their patients’ interests.”

St. Joseph did not admit liability in settling the case. Jeffrey K. Norman, the hospital’s president and chief executive officer, said in a statement that it adopted “a cooperative and transparent approach guided by its faith-based system.”

The hospital informed 600 patients this year that they might have received unnecessary stents from Dr. Mark Midei, who was suspended by the hospital in July 2009.

Midei, one of MidAtlantic’s co-founders before joining the St. Joseph staff, filed a $60 million lawsuit against the hospital last month. He alleges it made him “the fall guy” to deflect attention from an ongoing Medicare fraud investigation.

The False Claims Act settlement includes reimbursement for federal money spent on unnecessary stent procedures performed by Midei between January 2008 and May 2009.

Rival surgeons

The False Claims investigation was initiated five years ago by three cardiac surgeons from a former rival of MidAtlantic’s, Cardiac Surgery Associates P.A.

The doctors — Stephen D. Lincoln, Peter Horneffer and Garth McDonald — will split a whistleblower reward of nearly $3 million, according to their lawyer, J. Stephen Simms of Simms Showers LLP in Baltimore.

“It was a long time and a lot of work,” Simms said. “They all feel like it was definitely the right thing to do.”

A 1999 electrocardiogram-reading contract typified the relationship between St. Joseph and MidAtlantic, according to the settlement. The contract was renewed yearly, and eventually the hospital was paying MidAtlantic for services “that had absolutely no relationship” to reading EKGs as well as the salaries of two MidAtlantic nurse practitioners who previously worked at the hospital, the settlement said.

When St. Joseph tried to eliminate the nurse practitioner salaries in 2004, MidAtlantic “demanded” the hospital pay equivalent amounts under two new contracts so that MidAtlantic’s “overall remuneration amounts remained the same,” according to the settlement.

A request for comment left with MidAtlantic’s administrative offices in Pikesville was not returned Tuesday night.

Lincoln, one of the initial complainants in the False Claims Act suit, is also involved in a longstanding $60 million lawsuit in Baltimore County Circuit Court against MidAtlantic stemming from a failed merger between the two rivals. Simms, who is not involved in the county case, said the federal settlement would have no effect on that lawsuit.

Lawyers involved in other suits connected to stent implants were still trying to digest the news of the federal settlement late Tuesday.

Stephen L. Snyder, whose firm is representing Midei in his lawsuit against the hospital, said his initial reaction was that the settlement “completely supports our position.”

“The allegations [in the settlement] are business allegations that flow from St. Joseph to the business people at MidAtlantic. They had nothing to do with Mark Midei and preceded Mark Midei,” said Snyder, of Snyder & Snyder in Pikesville. “Mark Midei was made a sacrificial lamb.”

Andrew G. Slutkin, who represents about 10 stent patients suing the hospital and Midei, said he did not think the settlement would have any effect on his litigation. Midei’s actions were a small part of the settlement, he said, but it shows the federal government did not want to resolve the fraud allegations without addressing Midei’s role.

“This tells me Midei is clearly in the sights of federal prosecutors,” said Slutkin, of Silverman, Thompson, Slutkin and White LLC in Baltimore.

The hospital also announced Tuesday it had formally signed a five-year corporate integrity agreement with the federal Health and Human Services Department to ensure compliance with federal health care regulations. Among the requirements are the appointment of a corporate responsibility officer and enhanced physician peer review.

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Click here to read the settlement agreement document (PDF)