Attorney General Jack Conway, along with Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky, the Federal Bureau of Investigation (FBI), the U.S. Dept. of Health and Human Services (HHS), and the U.S. Dept. of Justice, today announced that King’s Daughters Medical Center (KDMC) in Ashland, Ky., has agreed to pay the U.S. Government $40.9 million to resolve civil allegations that it made millions of dollars by falsely billing federal health care programs for heart procedures that were performed on patients who didn’t medically need them.


The investigation was handled by Attorney General Conway’s Medicaid Fraud and Abuse Control Unit, the FBI, the U.S. Dept. of Health and Human Services Office of Inspector General (HHS-OIG), the Commercial Litigation Branch of the Dept. of Justice’s Civil Division and the U.S. Attorney’s Office for the Eastern District of Kentucky.


The Commonwealth of Kentucky will receive $1,018,380, which represents the state’s share of the recovered Medicaid funds. The Medicaid program is funded jointly by the federal and state governments.


“We take very seriously our obligation to ensure the safety of patients in Kentucky and to hold accountable those who put profits ahead of patient care,” Attorney General Conway said. “I appreciate the hard work of my Medicaid Fraud Unit and all of the agencies involved in this case, and I am pleased that we are able to recover this money on behalf of Kentucky taxpayers and a vital state program.”


The government alleged that, between 2006 and 2011, KDMC maximized reimbursements from Medicare and Kentucky Medicaid by billing for numerous unnecessary coronary stents and diagnostic catheterizations performed by KDMC physicians. The government also alleged that the physicians falsified medical records in order to justify these unnecessary procedures, which allegedly generated millions of dollars in fraudulent reimbursements for KDMC.  This alleged conduct violated the False Claims Act because under federal law, federal health care programs only reimburse providers for procedures that are deemed medically necessary.


To the knowledge of the U.S. Attorney’s Office, this case marks the largest settlement involving a hospital in the history of the Eastern District of Kentucky (District consists of 67 counties). The settlement amount roughly doubles the amount of money KDMC received as a result of the alleged fraudulent billing for the unnecessary services.


“The conduct alleged in this matter is unacceptable, victimizing both taxpayers and patients,” said Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky. “Treatment decisions motivated by financial gain undermine public confidence in our health care system and threaten vital federal programs upon which so many of our citizens rely. We will not relent in our efforts to protect the public from the sort of systematic misconduct alleged in this case.”


The settlement also resolves allegations that KDMC violated the Stark Law by engaging in improper financial relationships with certain physicians. The government contended that KDMC paid some cardiologists salaries that were unreasonably high and in excess of fair market value. The government further contended that the cardiologists receiving these unreasonably high salaries referred their patients to KDMC for various health services. The Stark Law is designed to limit the influence of money on physicians’ medical decisions by prohibiting financial relationships between hospitals and referring physicians, unless these relationships meet certain designated exceptions.


In connection with this settlement, KDMC has agreed to enter into a Corporate Integrity Agreement with the HHS-OIG, which obligates the hospital to undertake substantial internal compliance reforms and to commit to a third-party review of its claims to federal health care programs for the next five years.





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