Steward Health Care System to Settle Medicare and Medicaid Kickback Allegations for $4.7 Million


The United States and the Commonwealth of Massachusetts (collectively, “the Government”) have reached a settlement (the “Settlement”) of approximately $4.7 million with the Steward Health Care System LLC (“Steward”). This settlement arose as a consequence of the Government’s investigation of allegations contained in a False Claims Act complaint (“the Complaint”) filed by three Massachusetts relators. Steward is the largest, private, for-profit healthcare network in the country and owns and operates multiple hospitals in Massachusetts and other states.

The whistleblowers, including two doctors who practiced at Steward, Stephen M. Zappala, M.D and Olivia Lanna, M.D., filed their lawsuit on behalf of the Government in the U.S. District Court of Massachusetts in 2018. They were represented by Lisa Arrowood and Sarah Sousa of Arrowood LLP and Jeanne Markey and Gary Azorsky of Cohen Milstein Sellers & Toll PLLC based in Washington D.C. Ms. Arrowood and Ms. Sousa also represent Dr. Zappala in connection with litigation pending in Massachusetts state court alleging, among other things, that he was wrongly terminated for complaining about Steward’s policies in discouraging referrals to doctors and hospitals outside the Steward system.

“Our firm has from the start represented underdogs in difficult cases, and the whistleblowers in this case demonstrated real courage in coming forward,” said Lisa Arrowood, founding partner with Arrowood LLP.

The whistleblowers in the federal action alleged, inter alia, that Steward had both provided payments to specialists, such as urologists, for services which were not performed, and rented space from providers in order to induce patient referrals to its Accountable Care Organization. Under the terms of the Settlement, neither the federal nor state government takes any position as to the violations of the False Claims Act alleged in the Complaint and as part of the resolution of this matter the Complaint is being voluntarily dismissed.

As part of the Settlement, Steward admits and accepts responsibility for three categories of conduct which it voluntarily disclosed to the Government. First, Steward disclosed to the Government that it had “failed to charge the proper rent” on leases it had with approximately 50 physicians, physician organizations and non-physician organizations resulting in rent payments below fair market value. It thereby may have violated the anti-kickback statute or the Stark Law prohibiting physician self-referrals. Second, Steward disclosed to the Government that the Steward Good Samaritan Medical Center, Inc., (“GSMC”) entered into a compensation arrangement with Dr. Bahige Asaker for services which Steward cannot confirm were performed and thereby may have violated the anti-kickback statute. Third, Steward disclosed to the Government that GSMC entered into arrangements with two urology centers, Brockton Urology Clinic and Adult & Pediatric Urology Center, P.C. for specified services which were not provided.

“My role as a physician is to uphold the integrity of the healthcare system and provide an environment that is committed to the health of our patients. This settlement will forge a brighter path for healthcare,” said Olivia Lanna, M.D., one of the three whistleblowers in the case.

The Settlement provides that Steward will pay the Government $4.7 million. After receipt of payment, the Government shall pay a relator’s award of approximately $725 thousand dollars to be split among the three whistleblowers. Also under the terms of the Settlement, GSMC and the Office of the Inspector General for the Department of Health and Human Services (OIG-HHS) shall enter into a Corporate Integrity Agreement.