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Oceanside Hospital Settles Over Alleged Medicare Violations

A healthcare provider holds a stethoscope in this photo, taken March 25, 2012.
flckr\Alex Proimos
A healthcare provider holds a stethoscope in this photo, taken March 25, 2012.

Tri-City Medical Center in Oceanside will pay nearly $3.3 million to settle allegations that it violated federal law by maintaining financial agreements with community-based physicians and physician groups that violated Medicare's prohibition on financial relationships between hospitals and referring doctors, the Justice Department announced Friday.

The Stark Law generally forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital, unless that relationship falls within an enumerated exception.

The exceptions generally require, among other things, that the financial arrangements do not exceed fair market value, do not take into account the volume or value of any referrals and are commercially reasonable.


In addition, arrangements with physicians who are not hospital employees must be set out in writing and satisfy a number of other requirements.

"The settlement of this matter reflects not only our commitment to protect the integrity of the healthcare system through enforcement of the Stark Law, but also our willingness to work with providers who disclose their own misconduct," said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department's Civil Division.

The settlement resolves allegations that Tri-City Medical Center maintained 97 financial arrangements with physicians and physician groups that did not comply with the Stark Law.

The hospital identified five arrangements with its former chief of staff from 2008 until 2011 that appeared not to be commercially reasonable or for fair market value.

The hospital also identified 92 financial arrangements with community- based physicians and practice groups that did not satisfy an exception to the Stark Law because the written agreements were expired, missing signatures or could not be located.


"Patient referrals should be based on a physician's medical judgment and a patient's medical needs, not on a physician's financial interests or a hospital's business goals," said U.S. Attorney Laura Duffy of the Southern District of California, which includes San Diego.

"This settlement reinforces that hospitals will face consequences when they enter into financial arrangements with physicians that do not comply with the law," she said. "We will continue to healthcare providers accountable when they shirk their legal responsibilities to the detriment of the taxpayer- funded healthcare programs."