Sutter Health to Pay $45 Million for Stark Law Violations

The U.S. Department of Justice (DOJ) announced on November 15 that Sutter Health, a northern California health system, agreed to pay a total of $45.6 million to settle allegations that it violated the Stark Law in submitting claims to Medicare for services. Sacramento Cardiovascular Surgeons Medical Group Inc. (Sac Cardio), whose physicians referred patients to Sutter, also reached a settlement with DOJ under which it will pay $506,000 for allegedly submitting duplicative bills to Medicare.

Sutter Memorial Center Sacramento (SMCS), which billed Medicare from 2012 to 2014 for services referred by Sac Cardio physicians, will pay $30.5 million to settle those Stark allegations. SMCS also entered into compensation agreements with the physicians under which they were paid more than the fair market value of services provided.

The other $15.1 million to be paid by Sutter included settlements of other alleged Stark violations by its hospitals, including other above-market payments to referring physicians; below-market leases of office space to physicians; and supposed reimbursements of physician recruitment expenses that exceeded the actual expenses. The settlement also resolved claims that Sutter ambulatory surgical centers double-billed the Medicare program for certain radiological services.

Some of the allegations against SMCS and Sac Cardio were originally brought by a whistleblower in a lawsuit under the False Claims Act. The whistleblower will receive $5.9 million as her share of the government’s recovery.