Florida Hospital Must Pay for “Reprehensible” Record Destruction in Stark Case

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A Florida federal judge ordered sanctions against Halifax Hospital Medical Center for destroying evidence requested as part of a False Claims Act suit. The suit (United States ex rel v. Halifax Hospital Medical Center, et al., No. 09-cv-1002 (M.D. Fla) led to an $85 million settlement agreement in March, with a second phase of the same suit set for trial in July. The hospital must now pay the price its non-compliance in the suit.

U.S. District Judge Gregory A. Presnell ordered that the hospital pay for the amount of whistleblower Elin Baklid-Kunz’s attorney’s fees and expenses incurred while attempting to obtain medical records from Halifax, an amount that could total hundreds of thousands of dollars.

In the original lawsuit, first brought by Elin Baklid-Kunz, an employee whistleblower, the government alleged that Halifax violated Stark Law and the False Claims Act by paying bonuses to a group of neurologists and oncologists in exchange for Medicare patient referrals. The complaint also alleged Halifax had improperly included the cost of these bonuses and prescription drug tests in its Medicare billings. Halifax agreed to pay an $85 million settlement rather than proceed to trial and face a possible $500 million in sanctions. Ongoing settlement discussions for the upcoming second phase of the lawsuit suggest the damages could surpass $300 million when all penalties are included.

The requested records that were destroyed by Halifax would have determined whether the hospital illegally admitted Medicaid patients for unnecessary short-stay inpatient treatment rather than providing more cost-effective outpatient care. The court ordered these documents to be turned over numerous times before Halifax admitted to destroying the records. The False Claims Act allows for the reduction of damages at the discretion of the court if the defendant fully cooperates with the investigation. However, Judge Presnell wrote that “Halifax’s conduct is reprehensible” and that the hospital must pay all of whistleblower Baklid-Kunz’s attorney’s fees incurred as a result of Halifax’s evasive actions.

Stark Law helps to prevent healthcare providers from making medical decisions about a patient’s treatment based on monetary incentives rather than what is in the patient’s best interest. Whistleblower Baklid-Kunz says she and other employees repeatedly warned Halifax about their violations of Stark Law prior to bringing the suit. Baklid-Kunz received $13 million in the first settlement, and could gain a larger share of the settlement in the second phase for her role in bringing the hospital’s Stark violations to light.