Crain’s Interviews Vezina Law -- Award-winning Allegiance Health has also been involved in lawsuits
November 16, 2015
Allegiance Health in Jackson has won several quality, patient safety and efficiency awards the past several years from the American Hospital Association, The Leapfrog Group and HealthGrades.
But it also was successfully sued in 2013 — along with Jackson Cardiology Associates — by whistleblower Julie Kovach, a cardiologist in Ann Arbor, for its role in performing unnecessary heart procedures on patients.
Allegiance and Jackson Cardiology agreed to a $4 million settlement with the U.S. Department of Health and Human Services. Allegiance paid a $1.8 million fine and Jackson Cardiology paid $2.2 million to settle the charges.
However, Allegiance was required to make annual reports to the U.S. Department of Justice as part of a five-year corporate integrity agreement.
Last week, Allegiance signed a letter of intent to merge with Detroit-based Henry Ford Health System. If the deal is consummated by March, it is expected that Henry Ford will be responsible for ensuring that Allegiance follows the reporting provisions until 2018.
Georgia Fojtasek, Allegiance's CEO, declined to explain the fraud charges. She said the hospital decided to settle the case and move on.
"We are using the opportunity to educate and get better," she said.
COO Bob Riney of Henry Ford also declined to talk about Allegiance's past problems. He said system executives aren't concerned with the fraud charges that occurred several years ago. "We reviewed the case and are very supportive of Allegiance's position," he said.
But this year, Allegiance was again sued on antitrust grounds by the Justice Department, along with three other health organizations, including Hillsdale Community Health Center, Community Health Center of Branch County and Toledo-based ProMedica Health System Inc.
The Justice Department charged the four hospitals with unlawfully agreeing to divide territories of competing health care services for marketing and advertising purposes.
"These hospitals conspired to deprive consumers and physicians of important health information and education," said Bill Baer, an assistant attorney general with the Justice Department's antitrust division, in a statement.
Since the June charges were levied, Hillsdale, Community and ProMedica have settled with the Justice Department. Allegiance is challenging the charges, Fojtasek said.
"We feel we did nothing wrong and believe we can resolve this issue when all the facts come out," Fojtasek said.
Mark Abueg, a Justice Department spokesman, said the department "will continue to litigate against ... Allegiance Health."
As part of the complaint, the Justice Department said Allegiance explained in a 2013 oncology marketing plan: “[A]n agreement exists with the CEO of Hillsdale Community Health Center, Duke Anderson, to not conduct marketing activity in Hillsdale County.”
Monica Navarro, an attorney who represented Kovach with the Birmingham law firm of Vezina Law, said it is unusual for the Justice Department to file a lawsuit against hospitals for anti-competitive conduct related to marketing and advertising.
But Navarro said the facts in the Allegiance-Jackson Cardiology False Claims Act case are rather stark.
"(Kovach) saw rampant fraudulent activity cardiologists performing unnecessary angiograms and invasive cardiac catheterization procedures at Allegiance," Navarro said. "She complained to Allegiance and was totally ignored. Allegiance was taking facility fees for all the unnecessary procedures and giving a blind eye to what was happening."
In a medical case review, the Justice Department found that three-quarters of these patients had no significant heart blockages. The catheterizations involve snaking a hollow tube into the heart through an incision in the patient’s groin.
Kovach also alleged Jackson Cardiology Associates performed a variety of other office-based medically unnecessary tests, including peripheral stents performed on an outpatient basis. Because the procedures were paid for by Medicare or Medicaid, taxpayers would be entitled to monetary damages under the False Claims Act.
Navarro said she has represented whistleblowers in at least 40 other false claims cases against hospitals.
"There is no clear pattern when hospitals get popped with fraud," she said. "Some are frequent flyers. They see it as a cost of doing business and continue on just as big and aggressive as they were before. Some hospitals, and I believe Allegiance is one, view these cases as transformative and there is a real change in corporate culture."
The Allegiance-Jackson Cardiology fraud was different than most because most cases involve billing for procedures that were not performed.
"These were unnecessary procedures on patients that in some cases harmed them," Navarro said.
Navarro said after the Allegiance-Jackson cardiology case was settled in 2013, she got many calls from patients and their families.
"I don't do medical malpractice, and I felt I shouldn't refer those. A lot of those patients are already dead. I don't know whether any patients pursued other litigations," she said.
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