Methodist Le Bonheur Healthcare allegedly paid independent physicians more than $400 million for referrals, according to a whistleblower lawsuit.
A former Methodist board member and the former CEO of Methodist University Hospital claimed that Methodist would share 340B drug discount program profits with West Clinic physicians each year as well as guarantee above fair market value rates for services, according to a qui tam lawsuit filed in Tennessee federal court in 2017. The scheme allegedly netted more than $1.5 billion in inflated revenues from 2012 to 2018, about half of which was funded by Medicare and Medicaid.
“The defendants’ scheme has resulted in massive financial enrichment to all parties at the expense of the Medicare and Medicaid programs,” the second amended complaint reads, noting that Methodist executives profited from bonuses based on the financial performance of the Memphis, Tenn.-based healthcare system.
The plaintiffs are seeking an unspecified amount of damages for six counts of False Claims Act violations. The state and U.S. government declined to intervene after receiving multiple extensions to deliberate.
Methodist said in a statement that its agreement with the West Clinic provided needed medical services for cancer patients and that it upholds the highest standards and complies with all legal and regulatory requirements.
“Our payments for the services provided were appropriate. We cooperated fully in the government’s investigation of these allegations, and we are pleased the government has decided not to intervene in the lawsuit at this time. The lawsuit lacks merit, and we will continue to vigorously defend ourselves,” the organization said.
Methodist, which had also been scrutinized for its widespread practice of suing low-income patients for unpaid bills, added that it “remains focused on providing our patients with the highest quality medical care regardless of ability to pay, just as we have done for the past 100 years.”
The West Cancer Center, which owns West Clinic, also disagreed with the allegations, noting in a statement that Methodist and West increased access, decreased mortality rates and introduced new cancer treatments.
The fraud was allegedly orchestrated in 2011 when Methodist and University of Tennessee executives discussed a financial “windfall” from West Clinic physicians’ referrals of cancer patients for chemotherapy infusion therapy that used expensive drugs. West Clinic physicians knew that they did not qualify for the 340B program so they sought to capitalize on Methodist’s 340B eligibility, according to the complaint, which lists Methodist and West Clinic as defendants but not the University of Tennessee.
Methodist would allegedly acquire chemotherapy infusion drugs and oral cancer drugs at discounts through the 340B program. West Clinic physicians would then order the drugs and chemotherapy services, but the retail drug prices charged to the patients and their insurance carriers would be far higher than acquisition costs, resulting in large profits to Methodist, plaintiffs claim.
In return for the alleged kickbacks, West Clinic would exclusively refer patients to Methodist rather than Baptist Healthcare, where West Clinic historically sent referrals.
In addition to the alleged 340B drug profit revenue sharing, Methodist paid $7 million—including $3.5 million in personal debts—to West Clinic physicians as a purported “investment” in their for-profit research company, according to the complaint.
Methodist’s total outpatient payments increased 82% from $$50.8 million in 2008 to $92.4 million in 2015, according to Medicare cost reports documented in the complaint.
Settlement discussions between the whistleblowers and the West Clinic are ongoing, according to the latest court filings, which also noted that “additional discovery is required” for settlement discussions between the plaintiffs and Methodist.
Defendants have filed motions to dismiss the second amended complaint, but the court hasn’t ruled yet.
More whistleblowers are filing qui tam lawsuits as healthcare fraud settlements climb, with the number of cases jumping from around 200 a year in the early 2000s to more than 400 annually since 2011.