Detroit Medical Center Pays U.S. $30 Million to Settle False Claims Act Allegations

Allegedly Engaged in Improper Financial Relationship with Referring Physicians

WASHINGTON – Detroit Medical Center, a non-profit company that owns and operates hospitals and outpatient facilities in Detroit, has agreed to pay the United States $30 million to settle allegations that it violated the False Claims Act, the Anti-Kickback Statute and the Stark Statute, by engaging in improper financial relationships with referring physicians, the Justice Department announced today.

The Stark Statute and the Anti-Kickback Statute restrict the financial relationships that hospitals may have with doctors who refer patients to them. Most of the relationships at issue in this matter involved office lease agreements and independent contractor relationships that were either inconsistent with fair market value or not memorialized in writing.

"Improper financial relationships between health care providers and their referral sources can corrupt a physician's judgment about the patient's true healthcare needs," said Tony West, Assistant Attorney General for the Department’s Civil Division. "In addition to yielding a substantial recovery for taxpayers, this settlement should deter similar conduct in the future and help make health care more affordable for patients."

The government learned of the statutory violations from Detroit Medical Center, itself, which discovered improper financial relationships with a number of physicians as it prepared for the sale to Vanguard. "We applaud the hospital leadership’s decision to come forward voluntarily to disclose these issues to the government," said U.S. Attorney Barbara McQuade.

Detroit Medical Center is in the process of selling its facilities to Vanguard Health Systems Inc., a company headquartered in Nashville, Tenn., that owns and operates healthcare facilities in five states. Vanguard also signed today’s settlement.

The case was handled by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Eastern District of Michigan, the Office of Inspector General of the Department of Health and Human Services and the Centers for Medicare and Medicaid Services.