On February 8, 2016, United States District Judge J. Randal Hall approved a $9.895 million False Claims Act settlement between the United States Department of Justice and Memorial Health, Inc., Memorial Health University Medical Center, Inc. and Provident Health Services, Inc. of Savannah, Georgia that also requires payment of Bowen Painter client Phillip S. Schaengold’s compensatory damages claim. The agreement represents the largest civil fraud health care settlement in the Southern District of Georgia, exceeding the $5.1 million payment Memorial Health made to DOJ to settle nearly identical claims in 2008.
In addition to the monetary component of the agreement, Memorial and its affiliates agreed to enter into a five-year Corporate Integrity Agreement (“CIA”) with the Office of Inspector General of the U.S. Department of Health and Human Services. The CIA requires Memorial to retain an independent review organization to monitor and assess the hospital system’s compliance with federal law including the Anti-Kickback Statute and the Stark Law.
Judge Hall’s approval of the settlement resolves a five-year legal dispute initiated by the filing of a False Claims Act / Whistleblower lawsuit by former Hospital President and CEO Phillip S. Schaengold in 2011. Mr. Schaengold alleged that Memorial paid its physicians in excess of fair market value in order to induce unlawful referrals for ancillary medical services that would be billed to the United States through the Medicare program.
After investigating Mr. Schaengold’s allegations, the U.S. Department of Justice intervened in the case on August 8, 2014, filing its own 4-count civil fraud complaint against Memorial and its affiliates. The United States alleged that Memorial violated the Stark Statute which prohibits physicians from referring patients to an entity in which they have a financial relationship.
Mr. Schaengold’s complaint also alleged that his employment as President and CEO of Memorial was terminated in retaliation for his numerous attempts to stop the hospital system from violating the Stark Statute and the False Claims Act in 2010 and 2011. He alleged that he was terminated within 48 hours of an email he sent to the Chairman of the Board demanding that the unlawful compensation structure be immediately rectified. Mr. Schaengold sought in excess of $5 million in compensatory damages.
Memorial agreed to settle Mr. Schaengold’s retaliation claim, including his claim for attorneys’ fees, at the same time as the settlement with DOJ was announced.
Mr. Schaengold is represented by Lars Liebeler of Washington, D.C. and by W. Andrew Bowen in Savannah, Georgia.