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Davis Brown Health Law Blog  

Health Law Blog: Hospital Chain Pays $16.5 Million to Settle Fraud Charges Stemming From Appraiser's Whistleblower Suit - October 22, 2012

Tennessee based HCA, Inc, a for-profit hospital chain, recently agreed to pay $16.5 million to settle a qui tam action alleging it violated federal law by illegally providing financial incentives to physicians to refer patients to its facilities.  


Specifically, HCA was accused of entering into unreasonable commercial transactions with physician groups in a position to refer patients to HCA's facilities, including leasing office space from a physician group at a commercially unreasonable and excessive rate. HCA had hired a third party to perform an appraisal but had ultimately agreed to pay rental rates in excess of the appraised fair market value.  The individual appraiser filed the qui tam action in which the government later intervened.


This case is an important reminder that every transaction with a potential referral source must be commercially reasonable and any remuneration consistent with fair market value. Even one transaction found to be in excess of fair market value can give rise to significant civil and criminal penalties.  

As attorneys we frequently advise providers to obtain appraisals and fair market value opinions for transactions with potential referral sources.  This case shows the importance of ensuring the ultimate transaction conforms to the appraisal.  While providers may disagree with an appraisal or valuation, these disagreements should be discussed and resolved with the appraiser prior to entering into the transaction.  If the appraiser is ultimately not convinced that his/her determination is flawed, the provider should avoid proceeding with a transaction that does not conform to the underlying appraisal or explore alternatives with legal counsel such as hiring additional independent appraisers to provide second and third opinions.


Additional information regarding the HCA settlement can be viewed at