Feds investigating doctor’s claim of civil fraud at Lexington Medical Center

The U.S. Attorney’s office in Columbia is investigating whether it will join a lawsuit filed in federal court by a former Lexington Medical Center physician-employee who alleges the hospital violated federal law by submitting illegal claims to Medicare and other federal health insurance programs, according to court documents.

However, Lexington Medical Center spokespersons said Thursday they have concluded that the U.S. Attorney’s office in Columbia has decided not to join the lawsuit filed by Dr. David Hammett, whom the hospital termed “a disgruntled former employee.”

Mark Shelley, Lexington Medical Center’s vice president of marketing and communications said the government has had months to review a trove of documents and its decision not to join the lawsuit bodes well for the hospital. Moreover, he said, the hospital has “cooperated fully” with government investigators, he said.

“After a full year, they (the government) have determined they are not intervening in this case,” Shelley said. “After 40,000 documents, interviews, discussions, visits, they have not found enough to join in on this case. If there was anything there, they could have joined in.”

Bill Nettles, U.S. Attorney for South Carolina, said his office has not made a final decision about joining the suit.

“Our position is that we have not reached a decision whether to intervene or decline this case,” Nettles said. “The motions filed by the federal government leave the door open.”

According to a Sept. 16 filing by the U.S. Attorney’s office, “The government requires additional time to evaluate everything that has been produced and to conduct further investigation.”

If the lawsuit continues, Shelley said, the hospital will fight it, because the hospital has done nothing wrong.

The government’s filing said a consultant retained by the government to evaluate the hospital documents “indicates there are possible Stark Law violations.”

Under the Stark Law, doctors are prohibited from having a financial relationship with the health care provider to whom they refer patients because doctors should only have medical reasons for referring patients. Hammett’s lawsuit alleges that Lexington Medical Center expects its affiliated doctors, who are the hospital’s salaried employees, to refer their patients to the hospital system for medical procedures.

According to the lawsuit, Hammett, a neurologist, said he was one of about 275 employee-physicians employed by Lexington Medical Center in various practices attached to the hospital. “Due to the nature of his specialty, Dr. Hammett orders a large number of MRI studies,” his legal papers said.

“Through its hub-and-spoke business model, Lexington Medical Center incentivizes physician referrals to the hospital by using a physician compensation formula that” keeps track of those referrals and physicians get compensated in part based on those referrals, the lawsuit said.

If Lexington’s doctors “refer patients to providers other than Lexington Medical Center, they are investigated by Lexington Medical Center and pressured to refer future business to Lexington Medical Center,” the lawsuit said.

In 2011, Lexington Medical Center purchased Columbia Medical Group, a Richland County group that Hammett worked for, and Hammett and the other doctors signed an individual employment contract with the hospital, the lawsuit said.

In May 2013, after Hammett referred several patients to an MRI provider in Richland County, hospital executives began to investigate Hammett and his outside referrals, telling him “his actions were putting jobs at risk,” the lawsuit said.

When Hammett refused to resign, in July 2013, the hospital fired him, the lawsuit said.

Hammett filed suit in September 2014.

“A disgruntled former employee initiated the action more than a year ago and after a thorough review, the US Attorney has chosen not to join this civil lawsuit,” Lexington Medical said in a statement on Thursday. “We appreciate the federal prosecutors’ commitment to examining hospital physician employment agreements to ensure compliance with all areas of the law.”

The statement quoted Mike Biediger, president and CEO of Lexington Medical Center, as saying, “We believe our physician employment agreements are proper and in compliance with state and federal laws, and we look forward to resolving this situation.”

The statement also noted Lexington Medical Center began employing physicians more than 20 years ago and has created a comprehensive network of approximately 300 doctors at 60 practice locations around the Midlands. It also said, “We are proud of the quality, compassionate care they provide to our patients every day.”

The lawsuit is called a qui tam, or federal whistleblower action. Under the rules of such lawsuits, in which a plaintiff asks the government to join in, the lawsuits are kept confidential for a period of time while the government decides whether to intervene. The lawsuit was made public only last week after Nettles, facing a deadline to respond, said the government would not join in, but was continuing its investigation. Qui tam is a Latin term meaning a person who assists the government in its prosecution of a potential wrongdoing.

Qui tam actions involve government money. Lexington Medical Center derives “a substantial portion of revenue from treating Medicare beneficiaries and billing the Medicare program,” the lawsuit said.

If the government does decide to intervene, it will bring in its own investigators, lawyers and financial experts into the action to assist Hammett’s private lawyers, Dick Harpootlian and Jenkins Mann of Columbia.

The lawsuit does not ask for a specific dollar amount of damages. But if Lexington Medical Center were to lose, it would be subject to potentially substantial fines. As the whistleblower who brought the allegations to the government’s attention, Hammett would be eligible for a portion of the fines.

This story was originally published September 26, 2015 at 7:00 PM with the headline "Feds investigating doctor’s claim of civil fraud at Lexington Medical Center."