CHATTANOOGA, TN  (WRCB) -– Memorial Health Care System has settled with the U.S. Attorney's Office, agreeing to pay $1,278,579 for alleged violations of the federal False Claims Act and other federal laws and regulations.

The settlement agreement alleges that, as early as January 2003, Memorial entered into a series of financial arrangements with certain physicians and physician groups through which it provided financial benefits intended to induce physicians to refer patients to Memorial facilities. These arrangements violated federal laws known as the Ethics in Patients Referrals Act (or the "Stark law") and the Anti-Kickback Statute and resulted in the submission of false claims to the Medicare system.  

U.S. Attorney William C. Killian explained that these laws are intended to protect patients by ensuring that physicians make patient referral decisions based on the patients' best interests without being influenced by payments or financial benefits received from hospitals competing for their business.  In addition, these laws are designed to protect the integrity of government-funded health care benefit programs. 

Federal law prohibits hospitals from submitting claims to government-funded health care benefit programs such as Medicare for inpatient and outpatient hospital services referred, ordered, or arranged for by physicians who have prohibited financial arrangements with those hospitals.