Sutter Health pays $30M in lawsuit

Editor’s note: This story, initially published Nov. 15, was updated on Nov. 27 with comments from Sutter Health.  

Healthcare services provider Sutter Health will pay $30.5 million in a lawsuit filed by a former compliance officer alleging fraud and kickbacks, though Sutter did not admit laibility and points out there was no finding that the company violated anti-kickback laws. 

Laurie Hanvey, a former compliance officer with Sutter Medical Center, filed a lawsuit in 2014 under the federal False Claims Act alleging Sutter Health paid kickbacks to Sacramento Cardiovascular Surgeons Medical Group. According to the allegations, Sutter Health, from September 2012 through September 2014, knowingly provided Sacramento Cardiovascular kickbacks in exchange for patient referrals to Sutter for both inpatient and outpatient procedures.

“The settlement agreement provides that Sutter and Sacramento Cardiovascular will receive a release from the whistleblower of her fraud allegations for limited claims and limited time periods in the case,” said Michael Hirst, Hanvey’s attorney of the Hirst Law Group.

Under terms of the settlement, unsealed Nov. 14, three surgeons of Sacramento Cardiovascular—Michael Ingram, Robert Kincade, and James Longoria—will pay more than $500,000, without admitting to the allegations.

Specifically, the lawsuit alleged Sutter Medical Center paid $912,500 to Sacramento Cardiovascular for “call-coverage agreements” that were “ostensibly to assure the availability of cardiovascular surgeons to provide emergency services on a 24-hour basis” while excluding other cardiovascular surgeons from the call-coverage contracts. These “call-coverage” contracts allowed Sacramento Cardiovascular to bill for any services they performed, as well as to receive from Sutter $2,500 per shift for 365 days each year. They received in total up to $1.9 million annually from Sutter for referrals, the complaint alleged.

Sutter Director of Public Affairs Amy Thoma Tan said the settlement “was not based upon any alleged payment for referrals” and that “any assertion that the settlement was based upon a finding of payments for referrals is completely inaccurate and Sutter denies such conduct.”

Hanvey worked as a compliance officer at Sutter Medical Center starting in September 2012 and, within just over a year of working there, began questioning payments and time sheets that were brought to her attention by a specialist in accounts payable. She repeatedly reported the alleged violations to her supervisors and Sutter management, but the activity continued, the complaint alleged.

Sutter took issue with allegation, saying the issues raised by Hanvey were identified by the company’s compliance program and that Hanvey was working with the company on remediation when she filed suit. 

Thoma Tan said the settlement included a self-disclosure from 2010 and two additional self-disclosures. 

“Self-disclosures are done when providers like Sutter self-identify a potential non-compliant arrangement and voluntarily disclose those arrangements to the government,” Thoma Tan explained in a statement. “Sutter’s compliance program discovered the issues, just as it was designed to do, and Sutter brought these matters forward on our own initiative.  Since the date of the 2010 self-disclosure, Sutter has invested significant resources into enhancing its compliance program and will continue to do so in its ongoing  efforts toward assuring absolute compliance with all applicable laws and regulations.”

The suit filed by Hanvey was investigated by the U.S. Attorney’s Office for the Northern District of California and brought by the Department of Justice.

The healthcare provider has faced a previous lawsuit by the Justice Department over false claims and billing practices. In April, it paid $30 million for submitting inaccurate information about the health status of beneficiaries enrolled in Medicare Advantage Plans, which resulted in the plans and providers being overpaid, the Justice Department said.