U.S. to Settle Kickback Case With O.C. Firm : Medicine: Agreement involving unit of Coram Healthcare Corp. of Newport Beach ends two-year probe.
In a settlement underscoring the government’s commitment to regulate physicians’ financial ties to private health-care providers, a unit of a Newport Beach home-infusion company has agreed to pay $500,000 to end a two-year investigation.
The agreement between T2 Medical, an Atlanta company that supplies intravenous drugs and nutrients to patients in their homes, and the U.S. Department of Health and Human Services was filed Monday in U.S. District Court in Atlanta. The probe had focused on whether T2 Medical’s infusion therapy centers violated federal anti-kickback laws.
T2 Medical’s centers were set up as partnerships jointly owned by the company and some physicians. When the investor doctors referred patients to the centers, they shared in the profits.
Without admitting to wrongdoing, T2 Medical agreed to stop managing physician-owned entities except on a limited basis, to stop offering doctors preferred deals on stock in the company and to avoid participating in any partnership with doctors in any business providing home infusion.
T2 Medical, one of four companies recently acquired by Coram Healthcare Corp. of Newport Beach, operates in more than 100 cities and 38 states nationwide.
“This is far-reaching and precedent-setting,” said Ross Stromberg, an attorney who specializes in health-care cases at the law firm Jones Day Reavis & Pogue in Los Angeles, on Monday. “The federal government is attempting to give notice to the field to be extremely cautious in business arrangements with physicians. It will have a chilling effect on what companies are doing. And I think the government intended that.”
Stromberg said the effects of the settlement go beyond what is spelled out in federal anti-kickback laws. Profiting from patient referrals has been a divisive issue in the medical community in recent years, prompting critics to declare that physicians who profit from their investments in services such as home infusion violate longstanding medical principles.
“This practice is unethical, and it’s gradually getting to be illegal,” said Arnold Relman, a Boston physician who is a former editor of the New England Journal of Medicine.
James M. Sweeney, Coram’s chairman and chief executive officer, said Monday that T2 Medical has already stopped forming the types of partnerships outlined in the agreement with the federal agency and that Coram will have repurchased all doctor stakes in the centers by December.
“It’s a real positive step for the whole industry to get away from this kind of practice,” said Sweeney, adding that Coram agreed to the settlement to avoid a long and potentially costly legal battle.
A new law that will take effect Jan. 1 specifically prohibits home-infusion companies from forming financial relationships with doctors who accept federal funds such as Medicare payments. And federal statutes for years have forbidden payments to doctors in direct return for a professional referral if federal funds are involved, Relman said. But physicians could still profit from investments in certain medical-services companies, such as high-tech laboratories.
Other analysts said that, while the settlement will have an effect, the amount of the fine imposed will not send shivers through the medical community.
“It’s so small that it doesn’t even qualify as a slap on the wrist,” said Randall Huyser, a health-care analyst at Furman Selz Inc., an investment bank in San Francisco. “The message of this is that it’s awfully hard to prove malfeasance.”
Suki Shattuck, spokeswoman for Homedco Group Inc. in Fountain Valley, said she does not expect the settlement to affect either Coram or Homedco, which is also in the home-infusion business. “We never operated in that way,” she said. “I don’t see the settlement impacting them significantly or us.”
Coram was created July 11 from the merger of four companies: T2 Medical, Curaflex Health Services Inc. of Ontario, HealthInfusion Inc. of Miami and Medisys Inc. of Edina, Minn. It is the nation’s second-largest provider of home-infusion services, which have grown in recent years as hospitals have moved to cut costs by hiring out costly services to private companies such as high-tech X-ray labs.
In New York Stock Exchange trading Monday, Coram’s stock closed at $18.125, down 12.5 cents a share.
