DAYTONA BEACH — Halifax Health must pay the U.S. Department of Justice $85 million within 10 days and operate under a corporate-integrity agreement for five years to resolve allegations that it broke a federal law meant to stop Medicare abuse, according to a settlement agreement filed Monday in federal court in Orlando.
Halifax Health says the settlement is not an admission that it committed fraud by submitting false Medicare claims to the government. The agreement states the hospital admits no liability in the settlement, except that it violated the Stark Law, which bars paying doctors based on referrals and volume.
Another part of the case involving allegations of unneeded admissions to the hospital is set for trial in July.
“We believe we have a fiduciary responsibility to avoid the risks associated with trial and the potential of a lengthy appeals process,” John Guthrie, a Halifax Health spokesman, said in a prepared statement. “We will continue our mission of providing exceptional patient care and providing health and wellness services to our community as the only safety-net hospital in the area.”
Elin Baklid-Kunz, the hospital's director of physician services, filed the whistle-blower lawsuit in 2009 accusing the hospital of maintaining illegal contracts with doctors and billing the federal government for unnecessary medical procedures. Baklid-Kunz and her attorneys will receive 24.5 percent of the settlement amount — about $20.8 million. Baklid-Kunz, who still works for the hospital, earns an annual salary of $92,081, according to hospital records.
The Justice Department accused Halifax Health of overpaying six cancer doctors and three neurosurgeons and submitting false Medicare claims. When the Justice Department joined the case, it said in a statement it was doing so because employment agreements such as the ones structured by Halifax Health can lead to unnecessary medical procedures and health care expenses.
In the settlement, the federal government maintains the merits of its accusations. Assistant U.S. Attorney Ralph Hopkins declined comment about the case Monday afternoon. A Justice Department spokesman said a statement would be forthcoming.
Halifax Health's employment contracts and business practices will be under greater scrutiny as a result of the corporate-integrity agreement in the 17-page settlement. The agreement includes federal oversight of all physician contracts, Guthrie said.
Last week, Halifax Health officials said the settlement would not include an admission of wrongdoing, and the public hospital with taxing authority would pay the settlement amount over a period of several years through “belt-tightening and the potential delay of capital expenses,” instead of raising taxes. The hospital system has poured more than $21 million into its legal defense so far.
In the agreement filed Monday, though, Halifax Health admits it violated the Stark Law, and the hospital is required to pay the money in the next 10 days — instead of over a period of several years. Halifax Health has about $420 million in cash reserves, while carrying about $348.2 million in long-term debt, according to a recent review by Standard & Poor's rating agency.
Halifax Health officials deny the hospital's doctors performed unneeded procedures and say they tailored the agreements with the intention of keeping critical doctors in the community.
The settlement does not include another part of the suit involving allegations that the hospital admitted patients for unnecessary inpatient stays of two days or less, instead of treating them on an outpatient basis. That matter is set for trial in July and carries potential damages and penalties of more than $240 million. The government did not intervene on those claims. The whistle-blower's attorneys are also entitled to ask for fees and costs related to the case.
“Halifax has not put this case behind them,” said Marlan Wilbanks, an attorney for Baklid-Kunz. “We think the biggest part of the case is left in front of them.”
Halifax Health has consistently denied the whistle-blower's allegations.