The federal government has intervened in a whistleblower lawsuit accusing Methodist Le Bonheur Healthcare of paying more than $400 million in referral fees to independent doctors.

The Memphis-based Methodist Church purchased nearly all of the outpatient locations at the West Clinic, the region’s largest oncology clinic.

The lawsuit said the “joint partnership” was formed to allow West’s patients to be treated at Methodist locations by physicians employed by West, opening up a new market for Methodists and reimbursement of Medicare to the health system for Cancer Care. The Methodist Church also allegedly siphoned referral information for inpatients from competitors, including Baptist Memorial Hospital.

The complaint alleges that Methodist and West never entered into any legal partnership because it may have violated anti-kickback statutes or Stark law. The Justice Department seeks to recover hundreds of millions of dollars for alleged false claims law and anti-kickback statute violations that occurred between 2012 and 2018.

“The Methodist Church was able to charge Medicare not only for the facility and specialty components of outpatient treatment, but also for the chemotherapy and other drugs provided, and Methodist could recoup a staggering $50 million in cost discounts through the 340B Drug Pricing Program. Dollar profits go to the Methodist Church in just one year,” the lawsuit filed Monday in federal court in Tennessee said.

The Methodist Church said in a statement that it would refute the allegations.

“The government’s complaint repeats a series of familiar allegations that falsely describe the relationship between MLH and West Clinic. As we have said many times since the lawsuit was made public more than two years ago: the affiliate’s compensation The structure has been designed by respected external experts who have determined that it reflects the fair market value of such services,” the company said.

As part of the deal, Methodist invested $7 million in ACORN research to help West Clinic coordinate clinical trials. According to the lawsuit, West Clinic and its medical director, Dr. Lee Schwartzberg, have a personal financial interest in ACORN. Methodist allegedly disguised rebates from West’s referrals as payments related to a $7 million investment and overpaid West’s management services.

The deal was also a vehicle to take advantage of the 340B drug discount program, which West Clinic was not previously eligible for, the lawsuit said.

Methodists who qualify under 340B are said to be buying chemotherapy infusions and oral cancer drugs at a discount. Doctors at West Clinic would then order drugs and chemotherapy services, but would charge patients and their insurers for the drug at retail prices well above the cost of purchase, generating huge profits for the Methodist Church, legal documents show.

Internal documents cited in the complaint show that Methodist expects revenue from the joint venture to increase to $1.45 billion from $1.25 billion. The complaint alleges that Medicare paid Methodist more than $300 million for outpatient services through West Clinic providers and more than $53 million in inpatient claims for West Clinic referrals.

Meanwhile, in the seven-year arrangement, Baptists received hospital reimbursements from Western referrals that were cut in half, according to the lawsuit. In 2011, Medicare paid Baptist nearly $6 million in 2011 to cover hospitalization claims related to West Clinic referrals; those annual earnings reportedly fell to less than $3 million a year. Methodist inpatient health insurance reimbursements related to West Clinic referrals reportedly jumped from $4 million a year in 2011 to about $6 million in 2012.

In November 2012, a West Clinic provider said: “I certainly don’t know how serious we are sending the biopsy to Duckworth right away and meeting with the Methodist Radiology Department.”

A former Methodist board member and former CEO of Methodist University Hospital submitted initial lawsuit 2017, unblocked in 2020. The program allegedly inflated revenue by more than $1.5 billion, about half of which was funded by Medicare and Medicaid.

government intervention Fewer than 25% of whistleblower lawsuits, according to the Justice Department. Legal experts say government authorities typically intervene when large settlements are imminent and the likelihood of success is higher.