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Cooper Health System will pay $12.6 million to settle kickback allegations

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Cooper Health System will pay $12.6 million to the federal and state governments to settle allegations of a kickback scheme to build its cardiology program.
Cooper Health System will pay $12.6 million to the federal and state governments to settle allegations of a kickback scheme to build its cardiology program.

Cooper Health System has agreed to pay $12.6 million to resolve allegations of running a kickback scheme for six years in an effort to build its cardiology program, the U.S. attorney for New Jersey said Thursday evening.

The investigation was spurred by a whistle-blower’s federal lawsuit claiming Cooper engaged in improper consulting and compensation arrangements with the local physicians who served on its Heart Institute’s advisory board. The multiyear, joint federal and state probe examined how those doctors were compensated and what services they provided to Cooper in return.

Allegations that Cooper had paid those physicians to refer their patients to its cardiology program under the veil of compensating them for their advice were included in the investigation, which uncovered that the health system sought and received reimbursement through Medicare and Medicaid for treating patients who were inappropriately referred by those doctors for in-patient and out-patient services at the Heart Institute.

“Payments to outside physicians by hospitals require heightened scrutiny because those payments may be improper if they are based on patient referrals. Such kickback arrangements interfere with the physician-patient relationship and can lead to problems of overutilization and increased costs,” U.S. Attorney Paul Fishman said in the announcement of the settlement. “Federal health care participants, such as Cooper, who run afoul of the prohibitions against kickbacks must be held responsible.”

Cooper denied its liability for violating federal or state laws, and Cooper President and CEO John P. Sheridan Jr. added in a statement the health system decided “to settle our dispute without the admission of wrongdoing to avoid the burdens and uncertainties of a protracted litigation” after negotiating with government lawyers for more than three years.

Under its settlement, Cooper will pay $10.2 million to the federal government and $2.3 million to New Jersey. As required by the False Claims Act, Dr. Nicolas DePace — the cardiologist who filed the lawsuit against Cooper that sparked the federal-state investigation — will receive $2.39 million from the governments’ recovery, and Cooper will pay his attorney fees and prosecution costs of $430,000.

According to DePace’s 60-page compliant, which both the United States and New Jersey governments joined, physicians were paid $18,500 to serve on the institute’s advisory board and attend four lectures each year between 2004 and 2010.

DePace, whose solo cardiology practice has offices in Cherry Hill and Sewell, was invited by Cooper to join the advisory board in the spring of 2007 and was told that the goal of the board was to “advise Cooper Heart Institute regarding innovative technologies, new management strategies, community needs and appropriate educational and research initiatives,” his complaint said.

But after attending his first board-required 50-minute lecture in June 2007, DePace caught onto the hospital system’s alleged kickback scheme and Medicare fraud, and he filed a lawsuit in 2008 under the False Claims Acts in an effort to stop it.

In addition to the monetary terms of the settlement, a consent order filed in federal court in Camden on Thursday calls for Cooper to enact corporate reforms designed to enhance accountability, training and other operations. To ensure compliance, Cooper has agreed to report to the offices of U.S. Attorney Fishman and Executive Assistant Attorney General John Hoffman about the corporate reforms.

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