The Detroit Medical Center will pay a 30-million dollar fine to settle allegations that it engaged in improper financial relationships with referring physicians.
The Justice Department Thursday announced the settlement less than an hour before the DMC and Vanguard Health Systems announced they are signing final documents and expect to complete the sale of the DMC to Vanguard Friday.
The Justice Department claimed the DMC violated the False Claims Act, the Anti-Kickback Statute and the Stark Statute, which restrict the financial relationships that hospitals may have with doctors who refer patients to them.
A statement said “most of the relationships at issue in this matter involved office lease agreements and independent contractor relationships that were either inconsistent with fair market value or not memorialized in writing.”
Detroit Medical Center officials alerted the feds to the violations after discovering improper financial relationships with a number of physicians as it prepared for the sale to Vanguard.
“We applaud the hospital leadership’s decision to come forward voluntarily to disclose these issues to the government,” said U.S. Attorney Barbara McQuade in a statement.
Justice Department officials say improper financial relationships between health care providers and their referral sources can corrupt a physician’s judgment about the patient’s healthcare needs.
“In addition to yielding a substantial recovery for taxpayers, this settlement should deter similar conduct in the future and help make health care more affordable for patients,” said Tony West, Assistant Attorney General for the Department’s Civil Division.
Detroit Medical Center chief executive Mike Duggan says “many processes and record-keeping were sloppy.” He says there’s no suggestion that DMC paid a doctor to influence referrals.
Duggan says the DMC’s sale to Vanguard “would have been dead” without a settlement this week.
As part of the $1.5 billion deal, Vanguard has agreed to keep all of DMC’s hospitals open for at least ten years, to invest an estimated $350 million for routine capital improvement and an additional $500 million on specific capital projects during the first five years of ownership.
The Associated Press contributed to this report.