September 18, 2015
The $69.5 million settlement by North Broward Hospital District in Fort Lauderdale, Florida to resolve False Claims Act allegations paints a cautionary tale of the importance of hospital practices and optics in connection with physician employment arrangements. The settlement arose out of a whistleblower claim that combined the Stark Law and the False Claims Act, and the core allegation that the establishment and maintenance of certain hospital-physician employment relationships violated the Stark Law. Given that most physicians in practice are now employed or aligned with a hospital or health system, the settlement provides important lessons and reminders relative to the minefields existing in today’s complex health care business and compliance environments. The settlement is a harsh reminder that hospital systems need to critically evaluate the types of management reports and assessments it develops, who receives the information and how that information is used.

The case was brought by Michael Reilly, M.D., an orthopedic surgeon who spurred North Broward’s invitation to become an employee and then complained that the hospital was unfairly competing by overpaying hospital-employed physicians. The specific allegations regarding North Broward acts and omissions are found in Reilly’s 127 page complaint. The matter was settled before North Broward responded, consequently, the hospital’s counter arguments or defenses are not known. Nonetheless, on the surface, the complaint’s allegations highlight key lessons and compliance concerns related to hospital-physician employment matters.

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