Hospital to Pay $20 Million to Settle Whistleblower Case

The U.S. Department of Justice (DOJ) announced on October 28 that Sanford Health, a hospital in Sioux Falls, South Dakota, will pay $20.25 million to settle a whistleblower lawsuit alleging violations of the False Claims Act and federal Anti-Kickback Statute. Two surgeons at the hospital filed the suit alleging that the hospital allowed another surgeon to accept kickbacks for using implantable devices obtained from his own physician-owned distributorship (POD).

PODs have long been considered inherently suspect under the Anti-Kickback Statute, as the U.S. Department of Health and Human Services’ Office of Inspector General explained in a Special Fraud Alert in 2013. The suit claimed that Sanford Health was warned of the scheme by other physicians, but continued to employ the defendant neurosurgeon and allow him to use the POD’s implantable devices in his spinal surgeries. The suit further alleged that some of the surgical procedures were not medically necessary.

In addition to the $20 million payment, Sanford Health entered into a Corporate Integrity Agreement under which it will be required to maintain compliance and risk-assessment programs, and will cooperate with the DOJ regarding alleged co-defendants.  The whistleblowers’ complaint and a detailed discussion of the case were published in the Dakota Free Press.