Heart Lessons

Cardiac Imaging Inc. (CII) and its founder, owner, and CEO, Sam Kancherlapalli have agreed to pay a total of $85,480,000 to settle allegations of violating the False Claims Act. These allegations stemmed from CII’s practice of paying excessive fees to referring cardiologists for supervising PET scans, which was deemed a violation of the Anti-Kickback Statute (AKS) and the Physician Self-Referral Law (Stark Law).

This settlement, totaling $85,480,000, is considered the largest single district civil settlement in the history of the Southern District of Texas (SDTX). CII agreed to pay $75 million plus additional amounts based on future revenues, while Kancherlapalli agreed to pay $10,480,000. These settlements are determined based on their financial capabilities.

The scheme: CII and Kancherlapalli diagnosed heart disease, the has been the leading cause of death in the United States since 1950. So, something serious. They developed a mobile scanning business and would take it to other physicians’ practices. Not out of the goodness of their hearts and not to provide a service to those who needed it at a fair price. No, they paid physicians a not-so-small fee (minimum $500/hr) for the right to park outside their practices. In return, the physicians had to refer them patients.

Here’s the problematic part: The fees they charged “substantially exceeded fair market value” for the physicians’ services. Why, you ask? Aren’t doctors worth $500/hr? Sure, as long as they are, you know, actually there providing services. Here, CII paid physicians for the time they spent in their offices caring for other patients or while they were not on site at all, or for additional services beyond supervision that were never or rarely actually provided. So, they paid physicians not for their expertise, but just the referral. That’s a no-no under the Anti-Kickback Statute and the Stark Law.

The fine: For that, they are agreeing to pay over $85 million based on Cardiac Imaging’s “ability to pay.” Cardiac Imaging agreed to pay $75 million, plus additional amounts based on future revenues. Congratulations, the United States is now your business partner. The DOJ reviewed the financial statements of Cardiac Imaging (and most likely its individual owners) to determine how much Cardiac Imaging could physically pay. $85 million is what the parties agreed on. This type of “ability to pay” approach is fairly common in settling cases under the FCA.

The whistleblower: The civil settlement resolves claims brought under the qui tam (whistleblower) provisions of the False Claims Act by a former billing manager at CII, Lynda Pinto. Under these provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. This qui tam action also raises claims against CII’s former president and part-owner, Richard Nassenstein, which are not resolved in this settlement.

If you would like to report healthcare fraud including violations of the Anti-Kickback Statute and Stark Law, you can contact attorneys at Markowitz Herbold. Vivek Kothari is a former federal prosecutor who represents whistleblowers in qui tam cases. For a free consultation, you can contact Vivek at 503-274-7425 or vivek@markowitzherbold.com