An Illinois healthcare imaging company and its founder, owner and CEO have agreed to pay $85.5 million to settle claims that the company allegedly paid kickbacks to physicians to refer Medicare patients for cardiac scans using “sham” medical supervision agreements in violation of the Anti-kickback statute.
The Settlement Agreement
Cardiac Imaging Inc. (CII) and Florida resident Sam Kancherlapalli faced allegations they violated the Anti-kickback statute, the False Claims Act and Physician Self-Referral Law (Stark Law). The company will pay $75 million, plus additional amounts based on future revenues. Kancherlapalli agreed to pay $10,480,000 to settle the healthcare fraud allegations.
The initial case was brought in 2018 under the qui tam or whistleblower provisions of the False Claims Act by Lynda Pinto, a former billing manager at the imaging company. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. Her share of the settlement has not been determined.
The qui tam action also raises claims against CII’s former president and part-owner Richard Nassenstein, which are not resolved in this settlement.
The Allegations
The complaint alleged that between March 1, 2014, and May 31, 2023, Cardiac Imaging and Kancherlapalli knowingly submitted false or fraudulent claims to federal healthcare programs. In addition, it was alleged that the company routinely waived or discounted co-payments for the procedures as a “courtesy adjustment” yet billed the government 100 percent.
Specifically, in relation to the Anti-kickback statute, the company’s agreements allegedly paid referring cardiologists $500 or more per hour, supposedly to supervise the PET scans for the patients they referred to CII. In fact, however, it was alleged that the referring physicians were paid $500 per scan and in most cases the patients were not seen for a full hour.
The Lawsuit
“The defendants per-patient kickbacks had the desired effect, inducing physicians to refer patients to CII for PET scans. They also constitute prohibited compensation arrangements between CII and referring physicians under the Stark Law,” the lawsuit stated.
The complaint outlined numerous cases in which physicians were sometimes paid thousands of dollars a day to “see” patients.
It was alleged that the money paid substantially exceeded fair market value for the cardiologists’ services because CII paid the referring cardiologists for each hour CII spent scanning the cardiologists’ patients, including time the cardiologists weren’t even on site or were not qualified to perform the tests.
The Compensation
CII’s fees also allegedly compensated the cardiologists for additional services beyond supervision they didn’t actually provide. CII supposedly relied on a consultant’s fair market value analysis that CII allegedly knew was based on inaccuracies about the services referring physicians provided and that the consultant ultimately withdrew.
The Corporate Integrity Agreement
In addition to the money paid, CII and Kancherlapalli entered into a five-year Corporate Integrity Agreement (CIA) with the HHS-OIG.
A comprehensive CIA typically lasts 5 years and includes requirements to:
- Hire a compliance officer/appoint a compliance committee
- Develop written standards and policies
- Implement a comprehensive employee training program
- Retain an independent review organization to conduct annual reviews
- Establish a confidential disclosure program
- Restrict employment of ineligible persons
- Report overpayments, reportable events, and ongoing investigations/legal proceedings
- Provide an implementation report and annual reports to OIG on the status of the entity’s compliance activities.
CII also must implement a centralized annual risk assessment and internal review process to identify and address the AKS and the Stark Law risks associated with arrangements and retain an Independent Review Organization. An IRO acts as a third-party medical review resource which provides objective, unbiased medical determinations that support effective decision making, based only on medical evidence. IROs deliver conflict-free decisions that help clinical and claims management professionals better allocate healthcare resources.
How We Can Assist
The Health Law Offices of Anthony C. Vitale stays abreast of current trends and changes in healthcare law and regulations. Our firm also can help you to create risk assessments and internal review procedures to ensure that you do not find yourself the target of an investigation. Should you become the target of an investigation, we will aggressively defend your rights to ensure you receive due process and a fair hearing.
Give us a call at 305-358-4500, or send an email to info@vitalehealthlaw.com and let’s discuss how we might be able to assist you.
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