News & Events

Settlement by orthopedic group provides 1.2 million reasons for healthcare providers to ensure compliance with fraud and abuse laws


A recent healthcare fraud investigation and settlement demonstrates three important reminders for healthcare providers:

  1. The federal government is serious about its commitment to holding providers accountable under fraud and abuse laws.
  2. The government’s enforcement efforts include not only large hospital chains but also physician groups.
  3. Providers should expect that employees (past and present) may be the instigators of the government’s actions.

Baldwin Bone & Joint, P.C. (BB&J), an orthopedic surgery and physical therapy practice in Daphne, Alabama, has agreed to pay the federal government $1.2 million as the result of a settlement arising out of allegations that BB&J violated several laws, including the federal False Claims Act, the federal physician self-referral law (the Stark Law); and the federal Anti-Kickback Statute (the AKS).

The case began as a qui tam, or whistleblower case, filed by a former exercise physiologist employee of BB&J. That suit initiated a federal investigation by the Office of Inspector General of the U.S. Department of Health and Human Services and, because of allegations involving TRICARE patients, the Defense Criminal Investigative Service.

The lawsuit filed by the former employee alleged that BB&J billed Medicare and TRICARE for physical therapy services performed by unauthorized providers, including athletic trainers and an exercise physiologist. The complaint also alleged that the group’s internal compensation plan violated the Stark Law because physicians were compensated on the basis of the volume of patients they referred internally for designated health services such as physical therapy, X-rays and MRIs. Many health care providers are familiar with prohibitions against remuneration being paid to physicians for referrals to facilities such as hospital or nursing, but many physicians are still not aware that the internal compensation plan of a medical practice is subject to the Stark Law.

The lawsuit also alleged that BB&J violated the False Claims Act because it did not return improperly billed federal patient payments. Generally, providers are required to return improper Medicare payments within 90 days of receipt, or be subject to the penalties, including possible imprisonment, set forth in the False Claims Act.

It is important to remember that this was a settlement, and no determination of liability was made. Still, it cost the physician group $1.2 million. Investigations also typically require a significant expenditure for attorneys’ fees, as well as physician and administrative time, and employee distraction. An investigation and the attendant publicity can also be a serious public relations event, cause problems with patients, payers and referral services.

How can you protect your business/practice?

First, of course, know the rules and follow them. Some healthcare laws are fairly obvious, but most involve layers of complexity and often don’t seem to follow a logical pattern, particularly the Stark Law and its voluminous regulations.

Second, adopt and implement a robust compliance plan. Your plan should also provide a mechanism for employees to raise concerns without fear of reprisal. If an employee feels he or she can raise a compliance concern with management and have it dealt with internally in an appropriate manner, the employee is less likely to become a whistleblower.

Note: The facts regarding this settlement were published by the U.S. Attorney’s office: