Jewish Hospital To Pay $10 Million In Federal Settlement Alleging Fraud

Nov 26, 2019

Credit J. Tyler Franklin

Jewish Hospital’s former parent company is paying more than $10 million to settle multiple allegations of fraud at the Louisville facility. The claims initially included in a federal whistleblower lawsuit allege Jewish Hospital illegally profited from prescriptions filled in the hospital’s in-house pharmacy, defrauded Medicare and filled prescriptions for patients without proper documentation of doctors’ orders.

The settlement was finalized on October 30, a few days before the University of Louisville announced it closed on the deal to buy Jewish and other KentuckyOne properties. Catholic Health Initiatives, Jewish Hospital’s previous parent company, confirmed it is paying the settlement money to the federal government, which was a party to the lawsuit.


The settlement stems from a whistleblower lawsuit originally filed in U.S. District Court in 2017 against Jewish Hospital and St. Mary’s Healthcare, KentuckyOne Health and University of Louisville Physicians. In that suit, former Jewish Hospital pharmacist Robert Stone laid out several allegations, including that Jewish used its own in-house pharmacy that filled drugs — and were reimbursed by Medicare for them — that didn’t always have doctor’s signatures. This violates a major federal health care regulation meant to ensure that patients are getting medically necessary drugs.

Jewish Hospital also allegedly filled and was paid by Medicare for prescriptions that the pharmacy didn’t verify were actually needed by patients.

The final settlement agreed to by Jewish Hospital and St. Mary’s Healthcare and the federal government only includes two of the original five allegations made by Stone, plus one additional allegation that wasn’t in the original complaint. In the settlement, Jewish Hospital denies the allegations and does not admit liability.

Michael Romano, spokesman for Jewish’s former parent company CHI said in an emailed statement that the in-house pharmacy, called Pharmacy Plus and Pharmacy Plus Specialty, closed in June.

“The primary allegation in the lawsuit was that Pharmacy Plus delivered needed refill medications by mail to transplant patients without keeping appropriate documentation of proof of delivery, or detailed notes of the patient’s current quantity at hand, both of which are part of the refill documentation requirements of the Medicare program,” Romano said.

Robert Thomas, Jr., an attorney for Stone who worked on the case, said the hospital cut corners in an effort to bring in revenue.

“The pharmacy was doing everything it could to capture the doctor’s prescriptions, rather than having those prescriptions go elsewhere; so if you make sure that everything goes through smoothly, without checking all the things that need to be checked, then you’ve reduced the number of hassles that the patients and the doctor have to encounter in getting the prescriptions filled,” Thomas said. “But if you reduce all those hassles, you’ve also cut corners in ways that mean people who are deceased are getting prescriptions or people who don’t actually need that particular drug or getting a prescription.”

The Lawsuit’s Origins

There are a number of rules that regulate how hospitals and pharmacies get paid by the government insurance program Medicare, which covers people with disabilities and those over age 65. When a health care provider gives financial incentives to doctors to refer patients, or routinely gives patients a copay break to incentivize their business — both claims included in the suit against Jewish Hospital — those acts are illegal and fall under a law called the False Claims Act.

“It’s a very strong law that it punishes companies that try to cheat the federal government or that cheat the federal government,” said Lexington Attorney Brian Vines, who worked on the case.

The story of the lawsuit began in 2014 when Jewish Hospital opened Pharmacy Plus, its own specialty pharmacy that could fill expensive drugs for high-cost patients including those who underwent transplant surgery. The lawsuit alleges that these patients were previously having their prescriptions filled at outside pharmacies, and Jewish saw an opportunity to profit by filling those prescriptions in-house.

But according to the lawsuit, Jewish Hospital doctors, including some from U of L Physicians who had admitting privileges, were reluctant at first to send patients’ prescriptions to the new in-house pharmacy. So, the settlement and lawsuit claim Jewish Hospital incentivized the doctors and patients to use the in-house pharmacy.

The Allegations

In addition to the incentives allegedly offered to keep prescriptions in-house, in the settlement the federal government alleges Jewish also waived co-pays and deductibles for insulin prescriptions at the Jewish pharmacy. This complaint wasn’t in the original lawsuit, but whistleblower attorney Robert Thomas Jr. said the DOJ likely figured out this was happening during investigations.

“Co-pays are there as kind of a check to make sure that people really do need this medicine, and if [pharmacies] are routinely waiving co-pays across the board, then usually something else is going on,” Thomas said.

The lawsuit also alleged that Jewish’s pharmacy provided specialized “care coordinators” to U of L Physicians who practiced at Jewish to help fill prescriptions. Those actions qualified as “kickbacks,” according to the suit because the coordinators were saving the doctors time in prescription paperwork, and thus fall under the Anti-Kickback Act.

“The resulting referrals have turned Pharmacy Plus and Pharmacy Plus Specialty into a revenue center for defendants, earning millions of dollars annually,” the lawsuit states.

U of L Physicians was a defendant in the whistleblower lawsuit, but was not included in the federal settlement. U of L spokesman John Karman declined to comment on U of L Physicians’ role in the lawsuit.

Thomas said he thinks the Department of Justice chose to hone in on only a few allegations in the settlement because Jewish Hospital was facing financial issues — and a potential sale to U of L.

“I think the economics of the hospital, being a target of an acquisition, meant that there was only so much money that could be captured and only so much time that could be devoted to the case,” Thomas said. “I think they [the Department of Justice] took the issues that were in front of them and easiest to prove, and when they realized that they weren’t going to be able to get too much further, they called it a day.”

Under the terms of the settlement, former Jewish Hospital parent company CHI will pay the U.S. government $10,101,132. The government will pay $1.85 million to Robert Stone, the whistleblower pharmacist who filed the initial lawsuit.